With Obamacare on the Ropes, Dems Go After the Insurers

With support for Obamacare dropping, the Democrats are now pointing the finger at health-insurance companies. Obama has made promises to increase regulation on the industry, but many of the proposals have already been enacted at the state level with poor results.

“I want insurance companies to be able to provide a return on their investment and their stockholders to benefit.  I want them to continue to do their job and make a profit.  But I also want them held accountable.”  So explained the Vice President on Tuesday in Maryland.

His speech was the first of a series on health reform. On Wednesday, he spoke to seniors. Again, he spoke about accountability for the insurance industry.

Other senior Administration officials are also speaking from the same notes.  The central message Americans are hearing these days from the White House: Washington needs to set some “ground rules” for health-insurance companies.

As the Washington Post notes: “Insurance companies have become the focus of those who favor reform…”

Indeed. Last week, the House Subcommittee on Domestic Policy held two days of hearings on health-insurance company practices.  Chairman Dennis Kucinich opened the proceedings by stating: “Corporate bureaucrats may put profits before people, thereby becoming as noxious as disease itself.”

And in his address to Congress earlier this month, President Obama made promises of industry regulation front and center.

With polls suggesting declining support for the sweeping proposals of Obamacare, “consumer protection” – as Democrats have labeled such measures – are increasingly being talked up.

As I note in this week’s issue of The Weekly Standard:

The House bill tabled in July is full of attempts to expand the government’s role in regulating health care companies. There is some good in the draft legislation, including a proposal to stop insurers from cutting coverage (known in the industry as “rescission”) without clear proof of fraud and limits to “caps on coverage,” which means that a patient in active treatment for, say, cancer, can’t suddenly be cut off because of an insurance company’s preset limit on lifetime spending. But the bill also includes plenty of ideologically based rules that micromanage every health-insurance policy. It even adds a process to create more rules without congressional debate.

If Democrats pass legislation, the future of American health care could be… New York?

For almost two decades, the Empire State has been busy experimenting with various reforms to make health insurance more compassionate and equitable.  Regulations, for example, require any applicant for insurance be covered (guaranteed issue) and that they be charged the same as everyone else (community rating).  These are the types of regulations that, for the record, Democrats are touting in Washington.

From a distance, they seem fair, helping to end the “discrimination” – to use the White House’s word – against people with pre-existing conditions.

The experience of New York would suggest the need to think twice, however. Since the state passed guaranteed issue and community rating laws in 1993, the number of individual-insurance policyholders has dropped roughly 96%.  No wonder – premiums have soared.  Part of the problem is that guaranteed issue and community rating laws make it possible to game insurance, since you can wait until after you’ve contracted an illness to buy a policy.  (If New York regulated home insurance like this, people could get coverage after their houses had caught fire.)  It’s also true the younger, healthier New Yorkers get priced out of the market.

In a new and important study published by the Manhattan Institute, researchers Steve Parente and Tarren Bragdon look at New York State. As my colleague Paul Howard summarizes in a Washington Examiner op ed:

[Parente and Bragdon] found that these regulations help drive up the cost of private health insurance in New York, and that repealing them would lower premiums and help as many as 37% of the uninsured there to buy private, unsubsidized coverage. It would also help reserve scarce tax dollars for the poorest and sickest New Yorkers.

Parente and Bragdon make several suggestions for reforming New York’s market, including a scrapping of some of the heaviest regulations.  (The full report can be found here.)

But as New York struggles to deal with the reality of its regulations, the rest of America needs to ask: is this really the model for the nation?