Thursday, August 26, 2010

Driving Down Premiums?

As advertised, Obamacare lowering premiums everywhere! Nah just kidding.

Look, the new regulations slowly being implemented (some starting in September) as part of this debacle (that apparently the "author" has not even read) will increase costs and drive out providers. Not sure how many times I have said that here, but I'll keep saying it. O'Care will force millions of seniors out of their current Medicare Part D drug plans almost immediately, even though the program has been fairly successful by government program standards.

How? Insurers will need to hike premiums as noted here to deal with these reform minded mandates. If health plans can't set premiums high enough to cover these new costs put on them by the government, guess what? They will go broke and exit the market. Making traditional health insurance unviable is the clear intent here, it is to have government control the delivery of medical care and that means controlling insurance companies. The state exchanges, which will allow people to buy gov't subsidized health insurance plans from private providers, that will be setup by 2014, will not have the consumer choices promised. Why? Well as I noted they will be all out of the insurance business by then. That will be just fine with the Democrats though, they will cry "market failure" and ask for even more government control, i.e. public insurance.

This stands in contrast to the last time we tackled a large entitlement program, the Part D plans began in 2006. The reason this program has cost not nearly as much as originally believed is that it did create an increase in consumer choice. It certainly is not a perfect plan and as most entitlements has its share of waste, bottom line is that it turned out way better than expected. The rules were purposely written to encourage plans to enter the market and allow them to turn a profit. Shocking, I know. The idea as it always is in a free market, is to allow the market to mature with competition. That in turn makes prices fall. Economics 101. I admit that any large entitlement isn't ever really "free" of government interference, but Part D was revolutionary in its implementation. Meaning it did not incur price controls or prohibit profit.

The President said a number of things about this current plan..."if you like your insurance you can keep it"..really? Chalk up the "choice and competition" myth as another promise it is clear he will not be able to keep. Not sure they were ever intended to be kept. Does this plan have an opportunity to surprise us and perform better than naysayers? I am a gambling man and I would put the likelihood somewhere between never and....well never. It must be repealed and replaced, short of that key parts must be defunded in order to get true reform of the insurance market.

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