Sunday, April 18, 2010

New York Times just noticed insurance regulations failing in New York

Via Memeorandum

Now they tell us, The New York Times finally gets around to reporting on the effects of insurance industry regulations in the state of New York that had some unintended consequences we are likely to see with ObamaCare as well:
New York’s insurance system has been a working laboratory for the core provision of the new federal health care law — insurance even for those who are already sick and facing huge medical bills — and an expensive lesson in unplanned consequences. Premiums for individual and small group policies have risen so high that state officials and patients’ advocates say that New York’s extensive insurance safety net for people like Ms. Welles is falling apart.

The problem stems in part from the state’s high medical costs and in part from its stringent requirements for insurance companies in the individual and small group market. In 1993, motivated by stories of suffering AIDS patients, the state became one of the first to require insurers to extend individual or small group coverage to anyone with pre-existing illnesses.

New York also became one of the few states that require insurers within each region of the state to charge the same rates for the same benefits, regardless of whether people are old or young, male or female, smokers or nonsmokers, high risk or low risk.

Healthy people, in effect, began to subsidize people who needed more health care. The healthier customers soon discovered that the high premiums were not worth it and dropped out of the plans. The pool of insured people shrank to the point where many of them had high health care needs. Without healthier people to spread the risk, their premiums skyrocketed, a phenomenon known in the trade as the “adverse selection death spiral.”
The federal mandate, that some Democrats argue doesn't even exist, is intended to offset the "death spiral." With penalties ranging from $695 for individuals and $2085 for families, there is little incentive to purchase the insurance especially at much higher prices necessary to offset the high risk pool insurers are required to cover.  If most purchase insurance there is a theoretical potential for prices to come down but this has not been shown to be true in Massachusetts.  Let's be honest though, no one made a better case against mandates than the candidate Barack Obama:
Now, under any mandate, you are going to have problems with people who don't end up having health coverage. Massachusetts right now embarked on an experiment where they mandated coverage.

And, by the way, I want to congratulate Governor Schwarzenegger and the speaker and others who have been trying to do this in California, but I know that those who have looked at it understand, you can mandate it, but there's still going to be people who can't afford it. And if they cannot afford it, then the question is, what are you going to do about it? 
Obama looked at mandates and campaigned against them.  Knowing full well mandates create larger problems, Obama orchestrated this massive health care legislation against the will of the American people.  Why?  It doesn't take much to figure out the woman featured in the Times article, April Welles, will be the prototype for the next round of Democratic sob stories offered as proof the only answer to the problem is single payer:
She was lucky to live in New York, one of the first states to require insurance companies to offer comprehensive coverage to all people regardless of pre-existing conditions. But Ms. Welles, 58, also pays dearly: Her premium is $17,876 a year.

“That’s a lot of groceries,” she said.
Is there anyone who can't hear the stump speeches being written almost as soon as ObamaCare starts to fail?   Insurers who would charge Ms. Welles $17,876 for insurance will be held up as villains despite the fact the legislation all but guarantee Ms. Welles' rates would be exorbitant.  Let's be honest, we are not talking about insurance anymore for Ms. Welles.  She would be denied fire insurance if she were purchasing a plan when her house was on fire.  Republicans need to repeal and replace ObamaCare with something that truly deals with costs.  Our country can't afford the promises made under Social Security and Medicare.  It won't be long before the politicians can no longer hide the fact our country is on fire and there are no insurers left to blame.

1 comment:

  1. Great post. I work at a family-owned insurance company (I'm not legally part of the family, but I feel like it here), and I cannot imagine forcing my employer to swallow the cost of moribund people's health care in exchange for selling them underpriced health insurance.


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