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Limiting Insurance Company Rate Hikes   February 23rd, 2010
Sounds attractive, but very bad policy       

 
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The newest twist to the Democrats' efforts at health reform or insurance reform (or whatever they call it today) is allowing the federal government to limit insurance company's ability to raise their rates. This is a populist proposal that might sound good but which could easily threaten the free market and insurance companies as much as anything else that has been proposed.

It costs around $1 trillion over a decade, requires nearly everyone to be insured or pay a fine, and puts new requirements on insurance companies, including - in a new twist responding to recent rate hikes - giving the federal government authority to block big premium increases.


Democrats have been in fantasyland every since they bought into the idea that costs can actually be reduced while simultaneously offering universal coverage which requires covering tens of millions of more people.

But, in a new demonstration of abject ignorance of economic reality, while loading new requirements on insurance companies (such as covering pre-existing conditions) they're now simultaneously proposing that the federal government be able to limit rate increases of insurance companies.

I'm as frustrated about rate increases as the next guy. I pay for my own personal health insurance out of my own pocket. No company or organization pays any portion of my health care. I pay every dime myself. And, as best as I can tell, my insurance rates have gone up about 25% in the last 4 years. It's downright maddening.

But we should not base decisions of massive consequence on emotions.

I hate the rate increases I've been subject to but I absolutely oppose the federal government stepping in and instituting price controls on insurance. Price controls are destructive and have no place in a competitive market.

Now some will make the argument that health insurance isn't competitive. If so, fine. All levels of government should immediately facilitate and permit the purchasing of health insurance across state lines. There's no reason someone in Colorado shouldn't be able to purchase health insurance from a company anywhere else in the country. This single change, more than anything, would lead to ferocious nationwide competition that would actually lead to fair pricing far more effectively than the federal government trying to dictate what a fair price is.

If we want lower prices on health insurance, we need to make sure the market is such that market forces deliver lower prices based on competition--not on government coercion.

I have to assume President Obama is floating the "rate limit" idea as a trial balloon, as a negotiating starting point, or so that, when Republicans rightfully reject price controls on sound economic grounds, the president can try to spin it as Republicans being in favor of higher insurance prices or being pawns of the insurance companies.

If it's the latter, what a petty and cheap political tactic we'll be witnessing. If it's one of the other two possibilities, we're witnessing desperation.

Either way it seems Obama simply isn't listening to the American public. He's apparently betting the near and mid-term future of the Democratic Party on a version of health reform that liberals don't particularly want, conservatives don't want, and people in the "middle" don't want. And even though no-one wants it, they're talking about using reconciliation (the "nuclear option") to pass this unpopular legislation.

I think the conclusion that must be drawn is that, at this point, this is really just about Obama. He's concerned with passing anything that can loosely be considered "health reform." He's more concerned with doing that in order to save his presidency than he is concerned with the future careers of Democrats in Congress, or the Democratic Party.

The question is: Are Democrats in Congress, and the Democratic Party, willing to sacrifice themselves in an attempt to save Obama's presidency?

Seriously, I can't believe they're not only still talking about this toxic legislation, they're actually considering stuffing it down America's throats by violating Senate procedures. In an election year. And after the town halls of 2009? And as Obama's poll numbers crater as a result?

I have to ask: Who is the genius that's advising these people?

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