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April 9 2010

Seriously, Government Health Care is Going to be GREAT

Nicole Kurokawa Neily

First, the good news: we’re only 2 weeks into a post-health care reform world, and so far, the sky hasn’t fallen.

Now, the bad news: the worst is yet to come.

How do we know that? Well, by looking at Massachusetts, that laboratory of democracy that instituted reforms very similar to what’s about to take place on a national scale.

Earlier this week, several insurers submitted their rate increase proposals to the state, which were promptly denied. The insurers, claiming that these rate increases were needed to keep them financially viable, retaliated by refusing to issue any new individual or small business policies.

From The Wall Street Journal:

[A]ll of the major Massachusetts insurers are nonprofits. Three of largest four—Blue Cross Blue Shield, Tufts Health Plan and Fallon Community Health—posted operating losses in 2009. In an emergency suit heard in Boston superior court yesterday, they argued that the arbitrary rate cap will result in another $100 million in collective losses this year and make it impossible to pay the anticipated cost of claims. It may even threaten the near-term solvency of some companies. So until the matter is resolved, the insurers have simply stopped selling new policies. 

A court decision is expected by Monday, but state officials have demanded that the insurers—under the threat of fines and other regulatory punishments—resume offering quotes by today and to revert to year-old base premiums. Let that one sink in: Mr. Patrick has made the health insurance business so painful the government actually has to order private companies to sell their products (albeit at sub-market costs). 

Remember, rate review authority was one of the major selling points of our new health care legislation, which we needed to protect consumers from undue premium hikes. Unfortunately, rate review (and the denials inevitably associated with it) is just another term for price controls – which don’t work out so well in practice. Well, well… turns out there’s actually some truth to the whole “supply and demand” thing after all!

A verdict on the Massachusetts squabble is expected early next week. Regardless of the outcome, however, it seems like the state – and eventually, the rest of the country – is in a “heads you lose, tails you lose” situation. Either prices will be artificially capped, causing supply to dwindle (with many companies and providers going out of business), or prices will continue to rise unabated because the underlying drivers of health care costs were never properly addressed.

Now, if only there were some way to really fix the problem

Independent Women’s Forum’s mission is to improve the lives of Americans by increasing the number of women who value free markets and personal liberty. Sister organization of Independent Women’s Voice.
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