January 7 2013

ObamaCare's "Loophole:" Double-Digit Premium Spikes

Hadley Heath

ObamaCare was supposed to *lower* our health insurance bills (by $2500, remember?) and today the New York Times is reporting that insurance companies are preparing to raise some premiums by about 20 percent this year.  Hit hardest will be individuals who have to buy their own insurance (outside of an employer) and small businesses. 

Why is this happening?  After speculating for a page and a half that for-profit greed is to blame for these increases, the NYT article mentions rising health care costs.  Susan Voss, Iowa insurance commissioner explains it this way:

“There’s a four-letter word called math,” Ms. Voss said, referring to the underlying medical costs that help determine what an insurer should charge in premiums. Health costs are rising, especially in Iowa, she said, where hospital mergers allow the larger systems to use their size to negotiate higher prices. “It’s justified.”

I wonder why health care firms are consolidating?  Why are big hospitals taking over?  Perhaps private practices and smaller clinics are dying, drowning in the sea of red tape created by "health reform?"

In terms of solutions, it's difficult for the New York Times to get creative.  The only possible solution imaginable is... giving the government the power to deny increases and essentially set prices.  The California insurance commissioner calls this a "huge loophole in the Affordable Care Act."

Insurance commissions in some states have that authority, and ObamaCare in fact does require insurance companies to get permission before any rate increases of more than 10 percent.  The rate increases have to be found to be "reasonable."

According to the federal analysis, 36 percent of the requests to raise rates by 10 percent or more were found to be reasonable. Insurers withdrew 12 percent of those requests, 26 percent were modified and another 26 percent were found to be unreasonable.

So, more reasonable than unreasonable, no?  Still, continuously jumping premiums - and health CARE costs - are a concern.  

But the answer does not lie in government monitoring or setting premium rates.  Imagine if instead consumers had bucked our insurance system when prices started to rise ridiculously: We might have developed a more robust direct-payment health care system, instead of creating ObamaCare's unholy alliance between insurers and the government.

No one should be surprised when, as ObamaCare's rules kick in over time, we continue to get more of the same in rising health costs.  Government mandates are a part of the cost problem, not the solution.

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