Higher Premiums? Blame Obamacare Not Insurers
Democrats have attacked health insurance companies for raising premiums. But the real problem lies with Obamacare's inability to stem the rise in health costs.
Wednesday’s Wall Street Journal reported that, “Aetna Inc., some BlueCross BlueShield plans and other smaller carriers have asked for premium increases of between 1% and 9% to pay for extra benefits required under the law, according to filings with state regulators.” The Journal goes on to attribute the increase to, “…letting children stay on their parents' insurance policies until age 26, eliminating co-payments for preventive care and barring insurers from denying policies to children with pre-existing conditions, plus the elimination of the coverage caps.” That someone like Nancy-Ann DeParle, the White House's top health official, would find this surprising is actually the big insurance surprise of 2010. Obamacare decreed that all young people who are under 26 must be covered under their parents’ insurance plan. When my son left our health insurance plan, his new plan cost about $5000 per year. The reason for this was that he might become ill and might need health care and that turns out to be expensive! Why Ms. DeParle, an expert in health care administration, would not expect that continuing his coverage under my policy would not lead to a new cost to someone, somewhere is astonishing.
Part of the reason that President Obama failed so miserably at convincing Americans about the wisdom of Obamacare is that he sold it as a cost saver. Unfortunately, the savings mechanisms are all demonstration projects and commissions that will try to rein in the cost of care through top-down directives about what is acceptable care. These will fail when they run into patient and physician resistance. Just remember the firestorm created when the U.S. Preventative Services Task Force tried to simply recommend a reduction in the frequency of mammography for younger women.
Are the insurance companies playing games? That is always possible and the stock prices have risen in anticipation of improved earnings. But after all, the country just gave them 30 or 40 million new customers so of course their revenues will increase. They still have to compete in many markets, provide huge infrastructure support to maintain an enormously complex web of claims payment and maintain an approach that controls fraud yet maintains relations with literally thousands of contractors in individual hospitals and physicians. This is why their profits are modest as pointed out by many public sources including Fortune magazine.
Today, speaking at the University of Pennsylvania, Tim Kaine, chairman of the Democratic National Committee, called insurance companies ,”heartless”. This kind of industry bashing is populism at its worst. Health insurance companies are public companies or not for profit companies. They must make a profit or have net earnings. They must obey the rules of the marketplace. They are highly regulated by State Insurance Laws and Insurance Commissioners. Their rate increases must be approved by the government. When rational state insurance commissions look at the actual data, cost increases are virtually always approved as costs really are rising.
Health insurance companies, acting in their self-interest, have tried to behave in a manner that will hold down health care costs and they have been vilified for it. What do you think will happen when the Federal Government takes over that function?
Health care costs will rise inexorably and probably in an uncontrolled fashion just as they are rising in every developed country that has tried to have a government controlled system. From an economic perspective, our country has had the worst of all worlds- no spending controls and no incentives to control spending. From a medical perspective, on the other hand, that system has led to great access to the most highly specialized care for the most serious illnesses. What is potentially developing for American health care is a system with weak mechanisms to actually control spending and bureaucratic obstacles to innovative approaches to making our high quality system a highly efficient system.