Posts Tagged ‘insurance’


November 14, 2013 Leave a comment

Most of the ground I will cover here I have been over already on this blog but I want to revisit the issue just to point out that it is playing out exactly the way I have predicted and to point out a few important points that some people may be missing about Obamacare.  I wrote this post over three years ago explaining how this bill was meant to destroy the private insurance market.  It deals with the specifics in more detail.

As most people know, a lot of people are losing their plans and experiencing dramatic rate increases in spite of the President’s numerous emphatic promises that this would not happen.  The line from the administration now is that these plans are being cancelled because they are substandard plans which don’t offer all of the coverage that people need.  Leaving aside the fact that the President never once promised that if you like your plan you can keep your plan as long as the government considers it adequate, this is still a complete lie.

It is true that plans are being cancelled because they don’t meet the minimum requirements set forth in the bill.  But these requirements are not in there to protect you from substandard insurance plans.  They are there because the point of the bill is to transfer wealth from the healthy to the unhealthy.  The way this is done is by forcing everyone to buy certain coverage even if they don’t need it and forcing them to all pay (more or less) the same price.  In this way the insurance companies lose money on the sick people but make it up by charging the healthy extra.  This wouldn’t be possible in a free market because companies would compete over the healthy people.  This is why insurance companies support the law, it creates a price-fixing cartel by which they can extract money from their customers without having to worry about that pesky competition.

In light of this it looks like there aren’t going to be enough healthy people signing up to be the cash-cows in this system.  This seems to be engendering a sense of comfort among many conservatives who think that Obamacare will collapse without these people supporting it.  This is a gross misunderstanding.  If you believe that, when healthy people don’t sign up and insurance companies start losing money, the government will wake up and say “hey, maybe our attempt to take over and micromanage the health insurance industry was misguided, I guess we better just let the free market handle it” you haven’t been paying attention for the last hundred years.

It won’t be Obamacare that collapses.  There is no provision in the bill saying that if it doesn’t work, it will go away.  It will be the insurance companies that collapse.  And this is exactly what progressives want because then they will simply say that the evil private insurance companies failed us and the government has to, reluctantly, move in and take over the whole industry.  But don’t worry this means everyone will get all the healthcare they “need” and it will be cheap and easy and provided by pixies and unicorns with breath that smells like sunshine.

Categories: Politics Tags: , ,


November 11, 2010 Leave a comment

Here are a few stylized facts:

1. Most Americans don’t like the healthcare bill.

2. Most Americans “like” social security and medicare.

3.  Democrats claim that once Americans learn what is in the healthcare bill they will like it.

They are right about this.  Well that’s not exactly accurate.  What they mean when they say people “like” social security is that people don’t want to end it.  And this is what they really mean about healthcare as well.  But this doesn’t mean it’s a good idea.  Every time I see a Democrat on tv saying to a conservative/Republican “so you don’t think we should have social security?” and see the Republican squirm and back down I want to scream at my TV.  “Yes!  Social security was  terrible idea!  Medicare was a terrible idea!” 

These programs are one of the main sources of our current calamity.  One way or another they are going to collapse, either because we phase them out or because they (along with many other problems) collapse the whole government around them.  But people “like” them because these programs send them a check every month.  It’s not rocket science!  It’s not that over the last 40 years everyone underwent a deep intellectual consideration of the issue and decided that it’s a good idea for the government to take your money by force for your entire life and give it to someone else on the promise of taking someone else’s money and giving it to you when/if you get old enough.  It’s not a good idea.  It’s not efficient, it’s not sustainable, it violates the fundamental tenants of individual liberty and responsibility, it’s not a good idea!

But by now, people have planned their lives around social security and medicare.  We have a generation of seniors who have paid into it their whole lives and believed that they would get a certain amount of benefits back.  They were told that this was a perfectly stable system and it was fair and everything would be fine.  These were lies.  But now they have planned their retirement based on the expectation of that money.  If you take it away they will be screwed.  Of course they don’t want to end it.

It would seem like a crime to take away social security benefits from people who have paid into it their entire lives.  And it is a crime.  But the crime has already happened.  The crime was taking that money in the first place and giving it away to someone else (much of it has gone to other programs).  Now the question is not “should we rob the public of their social security money?” it is “since we have already robbed the public of their social security money, who should end up paying for it?”  I am not proposing an answer to this question here I just want to point out that the crime occurred when we instituted the program in the first place not when it eventually collapses.

The exact same thing is happening with the healthcare bill.  It’s not that people will decide it’s a good idea once it’s been in effect for a few years, it’s that it will distort the whole healthcare industry to the point where people will not want to go back to a system that makes sense because it will imply some short-term disruption to their lives (given the nature of the issue, for some it will be long-term) which they will not want to bear.

Here is an example.  Since you cannot be denied care for having a preexisting condition (the part of the bill which is simultaneously the most destructive part and the part which everyone supposedly agrees on) people will go without health insurance (and potentially pay a fine) because when they get sick they can just go get insurance and insurers will be forced to take them (and the price will be regulated).  As I have pointed out before, this is a complete distortion of the meaning of insurance.  But once it is instituted, if you try to go back to a free insurance market it will yank the rug out from under these people.  They would have to pay a fair price for insurance which, if they had a preexisting condition, may be exceptionally high.  That’s why you get insurance before you get sick.  That’s the point of insurance.  But once they distort the system, they make going back to something that makes sense extremely disruptive.

This is what they mean when they say that people will learn to like it.  They will become dependent on it.  This is, in fact, what they mean by “progressive.”  And this is why it is of the utmost importance to repeal it now before this happens.  Unfortunately, it’s difficult for me to imagine that happening….

Health Insurers Plan Hikes

September 8, 2010 Leave a comment

That was today’s WSJ headline.  So I have a few points.  First, with regard to my earlier comments about the government making it excessively difficult to be productive without working for a large company or the government, notice this quote.

The rate increases largely apply to policies for individuals and small businesses and don’t include people covered by a big employer or Medicare.

And second, recall that they blamed all the supposed problems with healthcare in this country on the free market when you read things like this.

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. (emphasis added)

… the White House contacted company officials and accused them of inaccurately justifying the increase.

About half of all states have the power to deny rate increases. Ms. DeParle pointed out that the law awards states $250 million to bolster their scrutiny of insurance-rate proposals, saying that will eventually curb premiums for people.

Some regulators say not all insurers have adequately justified their increases. “A lot of it is guesswork for companies,” said Tom Abel, supervisor at the Colorado Division of Insurance. “I was anticipating the carriers to be more uniform.”

This is nothing even remotely resembling a competitive industry.  It is a government-run industry and it has been for decades.  If you want to know how free and unregulated the health insurance market was before this bill here is a paper from 2006.

Finally, these people who are doing this, if they are not just flat-out lying to us, seem to have no idea how a market works.  Listen to this.

“I would have real deep concerns that the kinds of rate increases that you’re quoting… are justified,” said Nancy-Ann DeParle, the White House’s top health official. She said that for insurers, raising rates was “already their modus operandi before the bill” passed. “We believe consumers will see through this,” she said.

They think that they can force companies to give away more services and it won’t cost anything?  Really?  I can’t tell whether they think we’re idiots or they actually are idiots.  This seems to stem from a belief that all big companies make excess evil capitalist profits and therefore, they can always be squeezed by the strong arm of government to provide something for nothing.  This is simply not the case though, even with all of their anti-competitive regulation in the healthcare industry the rate of profit is below average. They think that companies are always trying to raise their prices arbitrarily and the only thing keeping them from doing so is government.  The idea of competition is apparently completely foreign to these people.  Furthermore consider the simple-minded approach they take to letting you keep your plan if you like it.

While the increases apply mostly to the new policies insurers write after Oct. 1, consumers could be subject to the higher rates if they modify their existing plans and cause them to lose grandfathered status.

Did this guarantee come from a careful analysis of the effects of the bill on the insurance market?  Of course not, they just wrote into the bill that insurance companies couldn’t change your plan.  They think the answer to everything is to make a law.  This is crazy.  There is always a way around these kinds of laws.  In a few years there will hardly be anyone left with “grandfather” status and the ones who do have it will probably be sacrificing other things that they would have gotten otherwise but had to give up to keep that status.  Any competent economist could have told you that this healthcare business made no sense and could only be a disaster.  Oh by the way, as a competent economist I can tell what the next shoe to drop will have to be.  Here’s a hint.

Massachusetts, which enacted universal insurance coverage several years ago, also has seen steadily rising insurance premiums since then. Proponents of that plan attribute the hikes there to an overall increase in medical costs, while insurers cite it as a cautionary example of what can happen when new mandates to improve benefits aren’t coupled with a strong enough provision to force healthy people to buy coverage. (emphasis added)