Now that Obamacare has passed, according to Speaker of the House, Nancy Pelosi (D. Ca.), we can see what’s in it. But, rather than try to read all 2700 or so pages of the bill, let’s look at Obamacare in action.
I did a post a few weeks ago about the circumstances facing the largest insurance companies in Massachusetts. Three of the largest four health insurers posted operating losses for 2009, and, to no one’s surprise, they requested that the state approve premium increases for 2010. In response to these requests, not only did the state deny the increases, but, Governor Deval Patrick has insisted that,
price controls are the sensible response to this ostensibly industry greed.
Before you buy into the Governor’s argument about “industry greed’ you need to know that each of these three insurance companies is a non profit.
In an emergency suit heard in Boston superior court yesterday, they argued that the arbitrary rate cap will result in another $100 million in collective losses this year and make it impossible to pay the anticipated cost of claims.
So, each of these companies have simply stopped selling new policies. In response, the state has ordered them to continue selling new policies, at last year’s approved premium rates, or face fines. Interesting…last year’s rates caused the companies to lose money, and under threat of fines, the companies must continue to use those rates, thereby incurring additional losses for 2010. Maybe the fines would be cheaper than the eventual losses.
One irony is that Mr. Patrick’s own Attorney General and his insurance regulators have concluded–to their apparent surprise—that the reason Massachusetts premiums are the highest in the nation is the underlying cost of health care, not the supposed industry abuses that Mr. Patrick and his political mentor President Obama like to cite.
But, it gets better.
Massachusetts (as will Obamacare) requires that insurance companies must insure anyone, regardless of their physical condition at the time, and, that the “sick” can not be charged a higher premium than the healthy. So, people are ignoring the mandate that they must have insurance, only purchasing insurance when they get sick, and dropping coverage when they are healthy again. The Harvard Pilgrim health plan reported that,
[b]etween April 2008 and March 2009, about 40% of its new enrollees stayed with it for fewer than five months and on average incurred costs about 600% higher than the company would otherwise have expected.
This week Blue Cross Blue Shield reported a big uptick in short-term customers who ran up costs more than four times the average, only to drop the coverage within three months.
What does that practice do? It places insurance companies in the unenviable position of paying out far more in claims for these people than it collects in premiums from these people. Absent Governor Patrick’s price controls, that drives up premiums for all, thus forcing people to drop coverage until they become sick. And, the cycle goes on.
Were I a resident of Massachusetts I would be concerned that in the not to distant future there will be no company willing to write health insurance in Massachusetts, as, somewhere along the line, the existing companies will become insolvent.