The Health Care Bill Might Hurt The Insurance Industry And Competition

That comes from a Richard Epstein article in the 12-23-09 edition of the WSJ, p. A21. The article is Harry Reid Turns Insurance Into a Public Utility: The health bill creates a massive cash crunch and then bankruptcies for many insurers. Key experpts:

"Lost in the shuffle has been its intensely coercive requirements on health insurance issuers, especially in the individual and small group markets. Taken together, these restrictions are likely to drive them out of business..."

"...the bill's rebate program, which holds that once an insurance company spends more than 10% of its revenues on administrative expenses, its customers are entitled to an indefinite statutory rebate determined by state regulatory authorities subject to oversight by the Secretary of Health and Human Services."

these are "... heaviest in the small group and individual markets, where they typically range between 25% and 30%, without the new regulatory hassles."

"The CBO concluded that this one restriction turned the Reid bill into "an essentially governmental program.""

"...the bill will create state health-care exchanges supported by generous federal subsidies to unspecified millions of needy and low-income individuals. Any health insurance carrier that steers clear of these exchanges cannot keep its customers."

"...all insurers have to take all comers and to renew all policies except for nonpayment of premiums."

"... it's the government that requires extensive coverage including "ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance abuse disorder services, prescription drugs, rehabilitative and habilitative [sic!] services and devices, laboratory services, preventive and wellness services and chronic disease management, pediatric services, including oral and vision care.""

the bill "...authorizes state regulators, after recommendations from the federal government, to exclude insurers from the exchanges if their prices are too high,..."

"One common talking point of proponents of the Reid bill is that competitive markets don't really do a very good job of reining in costs. Indeed, the most common justification for the public option was to supply real competition to the private sector. Now that the option has vanished, the alternative regulatory technique is brute regulatory force. The argument seems to be that price controls alone can force out the waste and inefficiency that are posited to be the hallmark of private markets."

"... no insurer can simply cut back on services provided given the minimum standards."