Bringing on the Next Big Bailout

Earlier this week, President Obama slammed health insurance companies for their new rate increases. But as my latest column for The Week points out, Obama's own health reforms may lead the government to eventually come to the financial rescue of the industry.

Earlier this week, President Obama attacked health insurance companies for their new rate increases.  My latest column for The Week points out that while Obama demonizes the industry, he continues to push health reforms which could force the government into another big bailout -- this time of the insurance industry.

Over the past 30 days, health-insurance companies have announced shocking premium increases, headlined by a 39 percent increase for many Anthem/BlueCross policyholders in California. President Obama has slammed the insurance companies and redoubled his call for a new federal agency to roll back "excessive" rate increases. ...

The insurance companies’ customer bases are growing older, sicker — and more expensive. Consequently, insurers must now cover approximately the same volume of claims, but do so out of the shrunken revenue that results from fewer premiums. As the youngest and healthiest customers exit the marketplace, insurers load more and more costs onto those customers who remain, driving even more customers — and revenue — away.

Given these pressures, what would happen if a federal agency now intervened to ban or reduce an insurance rate increase? If the insurer cannot recover the cost of care from its shrunken customer base, from whom will it recover that cost?

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