Obamacare

Why the Obama Administration's Latest Gambit to Keep Health Insurance Rates Down Won't Work

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Whitehouse.gov

Obamacare's regulations have helped drive up the cost of health insurance sold through the law's exchanges. Now the Obama administration is, predictably, pushing states regulators to keep health insurance premiums down.

Big rate hikes are looming all over. As The New York Times reported last month, health insurers "around the country are seeking rate increases of 20 to 40 percent or more, saying their new customers under the Affordable Care Act turned out to be sicker than expected."

The Times now reports that the Obama administration is "trying to persuade states to cut back big rate increases requested by many health insurance companies for 2016."

The political incentives are obvious: Significant premium hikes are likely to further erode support for the law going into the 2016 election season.

The administration is claiming some victory already, the Times reports, saying that premiums will come in lower than what insurers have requested in Tennessee, where BlueCross BlueShield put in for a 36 percent rate hike, and other states.

It's possible, of course, that state regulators in a handful of states will help out the administration by aggressively pushing back against insurance hikes. But there are clear limits to this strategy as a tool for keeping premiums in check.

For one thing, the administration doesn't have a whole lot of leverage with states, or great insight into local insurance market conditions. As the Times reports:

State officials said their agencies had been reviewing insurance rates for decades and generally knew local market conditions better than federal officials.

Monica J. Lindeen, a Democrat who is the Montana insurance commissioner and the president of the National Association of Insurance Commissioners, said the letter from Mr. Counihan was interesting, but "did not point to any new information that would impact how state insurance departments regulate their health insurance markets." 

This is a polite way of saying that the administration doesn't have much of an argument. Instead, administration officials are just hoping that states will flex some regulatory muscle in order to bail the White House out of a potentially tough political situation.

Even if state regulators are willing to take action, however, there's only so far they can go. Insurers cannot be forced to operate unprofitably for very long. And insurers are already warning about the potential consequences of rate increases that have been lowered by regulators.

New York regulators reduced average rate increases in the state from 10.4 percent to 7.1 percent. But the industry group representing New York's insurers says the reduced rates don't reflect the underlying economic reality.

"The approved rates do not, in many cases, accurately reflect the financial status of plans as indicated in their rate submissions," said Paul F. Macielak, president of the New York association. "Health plans have suffered financial losses the last two years when the state significantly reduced premium requests. Plans cannot be expected to continue losing money year after year and remain viable."

This may be at least partially insurance industry bluster, designed to help better position New York's insurers in future negotiations with regulators. But it's not a completely bogus notion. There's little question at this point that enrollees in exchange plans across the country have turned out to be markedly sicker and more expensive to insure than expected, and that health insurers have lost money, in some cases quite a bit of money, as a result. (The New York Times reported a number of these losses last month.)

These plans can't keep operating at a loss forever. Eventually they'll pull their plans from the exchanges. As the Times notes, nonprofit plans in Iowa and Louisiana will likely be shuttered by the end of the year. And in Oregon—not exactly a bastion of conservative, anti-Obamacare sentiment—the state's insurance commissioner actually directed some health insurers to raise rates for next year by significantly more than requested—warning that "inadequate rates could result in companies going out of business in the middle of the plan year, or being unable to pay claims." The administration may ultimately find some success stories. But for the most part, state regulators shouldn't be expected to fix the White House's Obamacare premiums problem. 

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  1. health insurers “around the country are seeking rate increases of 20 to 40 percent or more, saying their new customers under the Affordable Care Act turned out to be sicker than expected.”

    Sounds like their ‘expectations’ were the problem.

    1. new customers under the Affordable Care Act turned out to be sicker than expected
      .
      No, goddammit, you’re a lying sack of shit. Obamacare explicitly told you to set your rates at whatever you figured the cost would be and not to worry about being wrong – if it turns out your rates were too low the government had a blank check with your name on it and if your rates were too high you just had to give back the extra money. So look at the incentives – set your rates high and customers would just go with a lower bidder and you won’t get to keep the money anyway or set your rates low and attract lots of customers and Obama is going to pay the difference. And why would Obama want to make that sort of deal? Because he got to crow for about a year over how low insurance costs were now that he was in charge of the healthcare system. (And BTW – what were total insurance costs when you add what Obama kicked in to what the customers were paying? Add together the ‘premium costs’ that we’re told have been held in check to the subsidy costs that weren’t there before.) It’s a win-win situation, the insurance companies get more money and Obama gets to claim insurance companies are getting less money. And some people knew all along that’s exactly the con that was being run, that any ‘savings’ Obamacare achieved were the same old bullshit pushing-the-costs-into-next-year accounting tricks the government uses in all its financial statements.

  2. “Plans cannot be expected to continue losing money year after year and remain viable.””

    (cartoon image of the NYC subway, Amtrak, Post office, Social Security, pointing their fingers and laughing at Health Insurers)

    1. (cartoon image of the NYC subway, Amtrak, Post office, Social Security, pointing their fingers and laughing at Health Insurers)

      I think you may have accidentally figured out the progtard’s “solution” to this problem: government funding. It’ll start out as a bailout of the insurance companies, because “if we don’t then poor people on the exhanges will be left to die in the street! WHY DO YOY HATE POOR PEOPL!” and then gradually morph into a de facto single payer system.

      1. Spot on. What you said has been the leftist/progressive plan all along. Too bad for them (and all the USA) is that their basic assumption that the overburdened taxpayer will go along with it is wrong. Middle class W-2 taxpayers and upper-middle-class small business owners will be crushed out of existence, shoved down into the ranks of the poor or forced out of the country, leaving only the rich to pay for all the entitlement programs. But we all know there aren’t enough rich people to carry all the poor, even if the rich paid 100% of their income in taxes, and we know even better that the rich won’t pay–they’ll buy as many politicians as they need to protect themselves (and in such a redistributionist society, justifiably so) with loopholes.

        So the left/progressives might get their single payer health system for a few years, maybe a couple of decades, but it won’t last much longer than that. It is always easier for the sick and poor to vastly outnumber the healthy and productive, and they cannot defy that truth.

  3. I was watching the news this morning and they reported on a bunch of the super PACs supporting GOP candidates. Several candidates, including Bush and Cruz were getting significant support from the Health Insurance industry. Something tells me that Obamacare, even under a GOP administration, isn’t going to get much better.

    1. EVUL MONEY

      what makes you think insurers don’t want the #@(*@ thing repealed?

      1. Captive audience in addition to their pre-ACA base. Expect subsidies in 3… 2… 1…

      2. The healthy insurance industry doesn’t want it repealed. In recent weeks there’s been a spate of M&A deals – a larger insurer buying a slightly less large insurer. They’ll consolidate into a handful of regional players who will then be able to lobby congress as a near monopoly. Crony capitalism at its best.

        Eventually, we’ll have de facto single payer, sorta like AT&T before deregulation of Ma Bell.

        1. Also, healthcare stocks have done better than the DOW or S&P. It is understood that the insurers will eventually have access – even more so than in the past – to that sweet government teat.

        2. When it reaches this level and scope, it’s not crony capitalism anymore, it’s corporo-fascism (versus the more radical Strasserian strain of fascism that seeks to overturn the existing structures to please the “proletariat”, then lock the thing down). This is the merging of corporations and government that has been going on for about the last 25 years and at a head spinning pace since 2008. To even use the word capitalism in any sense, even modified by “crony”, is to distort what is happening. It makes it like the corporations are the prime mover in trying to insinuate themselves where they don’t belong or get a benefit. The government is the prime mover here, and at this point corporations have little choice. The fact that the couldn’t beat them so they joined them doesn’t put the blame at their feet. Yet I can still resent, at times, for the cave-in. But don’t be fooled that this is something corporations wanted.

          But I’m not naive to think that once they’ve been pushed over the edge, they’re going to do everything in their power to make sure they can maximize their cash flow. But it really isn’t any different than any part of the Leviathan that it has been forced to merge with.

      3. Even if Obamacare gets repealed, I see most of the insurers making sure something worse is in its place. They have a mandate that people buy their product. And they only need to lobby 50 state industries to set prices rather than, ya know, deliver actual value to keep their customers. They also don’t need to compete on what they cover because it is all mandated.

        No, the insurance industry is right where it wants to be in this whole thing.

        1. The health insurance industry has been long gone forever. They had the shit regulated out of them at the state level and have been crony business cartels for decades. One of the reasons health care inflation was (prior to Ocare) so pernicious was because of the state regulations that block small companies from entry and gave larger ones bigger and bigger pieces of the regional markets. Combine the state regulation of insurance with the hospital and doctor cartels and there’s simply no possibility of a free market.

        2. Well, i disagree about your final point.

          There’s some truth to the above observations of the benefits of a mandate for industry, but the fact that they are forced to offer coverage for the most-variable and often-money-losing types of care (e.g. substance abuse, mental health, etc) is something most would like to ditch, and return to a more tiered-level of coverage where people are paying for the levels of coverage they actually want rather than what uncle sam insists everyone have.

          The system is needlessly complex, hard to manage, and rife with federal ‘gimmes’ every year that they can’t predict or guarantee. That is simply less preferable that a more-diverse product market where different companies can compete at different price points and at different levels of care. The ACA is terrible for Market Segmentation, and – as noted – forces consolidation for its own sake so that ‘competitors’ all offer versions of the same exact product.

  4. Why the Obama Administration’s Latest Gambit to Keep Health Insurance Rates Down Won’t Work

    Hmmm… because that was never their intent? You can’t grease the skids for single payer, and the huge accompanying government bureaucracy, if the current system can be percieved as even remotely palatable.

  5. Now the Obama administration is, predictably, pushing states regulators to keep health insurance premiums down.

    He wants to use regulators to keep prices down? Might as well use a can of gas to put out a fire. How long ago did Mises point out socialism’s price problem? If the price of health insurance is not determined by the market, the information conveyed by prices will become useless and arbitrary and will create entirely new problems at an exponential rate.

    1. The price of health insurance not being controlled by the market seems consistent with comprehensive health insurance as a whole: a commodity which lacks real price indicators resulting in overuse of services (what’s my Co pay? isn’t a real price)

      1. That is not the problem. The problem with heath care is not that there are not enough price indicators. The problem is more basic than that. Health care costs are totally unpredictable at the individual level. I could die in a car accident tomorrow and have a lifetime healthcare costs consisting of an ambulance ride to the morgue or I could develop a series of chronic diseases and have lifetime health care costs in the millions. There is no way to tell and therefore no way for me to plan for or save for the cost. The only way I can plan for that is to pool my risk through insurance. That allows me to pay for what my risk is but have the insurance company cover the costs if my actual costs are above the average for someone in my risk pool.

        Even that, however, is still insufficient because no matter how healthy I am eventually I am going to get old and sick and become a bad risk and the insurance is no longer going to be affordable. The only thing that saved the country from the scourge of single payer health care is that our health insurance is through our employers. This allowed old people and bad risk people to pool with healthy people and gave people the ability to have health insurance if they actually needed it. Take that away and people would have demanded single payer.

        1. If only health status insurance had taken off instead.

          1. It is a real problem. If we ever had a truly individual market for health insurance it would look like the market for universal life insurance. When you are young and healthy, you can easily get life insurance. When you get old, you can’t. You can get policies that are just investment policies and estate tax dodges. That doesn’t matter in the life insurance market because you need life insurance when you are young not generally when you are old. It would be a disaster in health insurance because you need health insurance when you are old and sick. You could basically buy health insurance as long as you didn’t need it and once you did would be SOL.

            1. Medical prices would also be a lot lower since more people would be paying out of pocket than via third parties. Also rather than providing a miniscule percentage of the health care market, lodge practice would be playing a significant role (think HMO’s – but run by health clubs or fraternal organizations or churches)

              1. Sure they would. I doubt however they would be that low, at least not for care of serious illness. The thing about medical care is that unlike a lot of things it doesn’t get cheaper it just gets better. if doctors were still treating patients with leeches, medical care would be very cheap. Hell, if we operated using 1950s tech it would still be pretty cheap and would even work most of the time. But it isn’t going to be cheap if you want it to be cutting edge. The research and expertise are just too expensive for that.

                1. The thing about medical care is that unlike a lot of things it doesn’t get cheaper it just gets better. if doctors were still treating patients with leeches, medical care would be very cheap.

                  Yes in the same way that agriculture would be cheaper if farmer’s didn’t have to spend money on tractors, and yet still with tractors farmer’s get more productivity and lower cost food to the market. It doesn’t make sense to say that advancements in technology and commerce make things both better and cheaper in basically every industry imaginable, except in healthcare where advanced technology can only raise quality by increasing cost.

                  1. Free society,

                    Not every industry is like agriculture. Not every activity is like growing wheat or raising cattle. The cost of the research that went into something like figuring out that germs caused disease or developing penicillin is not the same as the cost of developing HIV drugs or better forms of chemotherapy or ways to grow artificial livers. The nature of the problems is different. We have solved all of the easy problems in medicine. All that are left are the really hard and expensive ones.

                    Not every activity and market is the same. Some things really are different.

                    1. All that are left are the really hard and expensive ones..

                      They have been saying this exact thing about moore’s law for decades now. It is really expensive to drive the size of a transistor smaller and smaller. But we continue to do it. There is nothing about healthcare that makes it super special. Every science has laws of diminishing returns.

                      What generally happens in free markets is that we get a disruptive technology that comes out of the blue and shakes everything up. To really understand how this works, you should read The Innovator’s Dilemma. What you find is that you have entrenched products that do well for the market. And the producers find ways to make that product better and better, usually capturing a larger portion of the market.

                      Then a disruptive technology comes along. It generally isn’t as good as the entrenched competitors at first, but it competes along a different axis that the competitor cannot. Transistors couldn’t match vacuum tubes for sound quality at first, but they could be fit in a walkman. Newer smaller hard drives couldn’t compete with mainframe drives on storage and density, but they were cheaper and could be used in smaller computers. However, as these disruptive technologies ate up the lower margin stuff, they got better and forced out the entrenched competitors.

                      The problem today is disruptive healthcare- especially disrupting on price- can’t compete because there are no buyers.

                    2. Moore’s Law for cost failed at about 90nm. Since then the cost per transistor has gone up. Moore’s Law on scaling over time is failing about now (+/-2 years).
                      It’s a bad example anyway. It’s an exponential law which is doomed to fail eventually.

                    3. Not every industry is like agriculture. Not every activity is like growing wheat or raising cattle.

                      That’s entirely my point! It’s not as though the laws of economics apply to every conceivable industry except this one. It makes no sense to say that innovation breeds low costs and higher quality in every single industry except for the medical industry (which also happens to be the most heavily regulated industry in existence).

                      Not every activity and market is the same. Some things really are different.

                      I never said they were “the same”. But since the medical field is operated by the same species that operate all other known industries in the universe, it’s not altogether different either.

                2. The thing about medical care is that unlike a lot of things it doesn’t get cheaper it just gets better

                  It doesn’t have to be that way. The only reason we don’t develop cheaper healthcare is because there is no incentive to do so.

                  In the computer market, there is incentive for chip makers to develop a range of chips- from very expensive super powered chips to the cheaper ones for more price conscious consumers. Indeed, as the newest high end processor comes out, the once-awesome chip becomes cheaper. I can spend $100 today on a CPU that was $400 two years ago.

                  But in the Healthcare world, no one has to make that decision. They don’t have to say, “I’ll go with the cheaper option even if it isn’t as good.” Essentially, the healthcare industry is only going to build the super chip, and never improve it to make it cheaper because there is no market for the cheaper chip.

                  Think about it. If you were a Pharm CEO and your R&D team came to you and said “I can spend a billion dollars developing one of two pills. Red pill is 90% effective reducing pain at a cost of $100. Blue pill is 50% effective but costs $10.” Which are you going to choose knowing that insurance will cover both irrespective?

                  1. * Note that in the above post I said “Never” a lot, but really should have been saying “Less frequently”. Insurance companies still have an incentive to keep costs low but since there are very few of them and they aren’t the ones making the consumption decision (generally it is the doctor and patient), incentives aren’t aligned and we don’t have many millions of consumers trying and discovering disruptive products at all price points.

                  2. It doesn’t have to be that way. The only reason we don’t develop cheaper healthcare is because there is no incentive to do so.

                    That is just not true. There is always an incentive to do things cheaper. Just because the consumer will pay any price doesn’t mean the producer doesn’t have an incentive to provide the service cheaper. Providing a cheaper service means more profits.

            2. John that is the purpose of Health Status insurance- to mitigate the cost of health insurance as get more chronically sick.

              In any case, the Employer Sponsored Health Plan market is half of what is wrong with our healthcare in this country. Employers are incentivized to offer you wall-to-wall coverage because every dollar of benefit they provide you is untaxed instead of paying you money directly (which is taxed).

              In a market where people had portable health care, you would see far more catastrophic health insurance with less comprehensive coverage. And as a result the price sensitivity would be higher. My (elderly) dad just blew through a huge amount of insurance money due to heart surgery. The vast proportion of that cost was due to his hospital stay- essentially lodging. And that is a direct result of 90% of people- old or young- never having to price shop for hospital stays. Yes, his health care is not evenly spaced, but even then returning price sensitivity to the public would force healthcare to innovate and develop cheaper, more efficient options that help everyone all the time.

              1. In any case, the Employer Sponsored Health Plan market is half of what is wrong with our healthcare in this country. Employers are incentivized to offer you wall-to-wall coverage because every dollar of benefit they provide you is untaxed instead of paying you money directly (which is taxed).

                You are getting the causality wrong. The tax benefits make it more attractive but other forms of compensation are tax free as well. You don’t pay taxes on your vacation days or other kinds of in kind payments. Yet, people don’t over consume those. Why? Because people want cash more than they want some in kind payment.

                Health insurance is an exception to that. The reason is that people want health insurance. People are risk adverse. People always over consume insurance because they don’t like taking risks even if the math is in their favor. Economists, because they are eggheads and have no idea how actual people think and act, never get that and blame the over consumption of health insurance on the tax system. That is just not true.

                1. I don’t know where you live , but I pay FICA, state and federal taxes on my vacation pay.

                  1. But you don’t have to work for it.

                2. You don’t pay taxes on your vacation days or other kinds of in kind payments.

                  Actually, yes I do pay taxes on my Vacation days. They are paid to me as salary and that salary is taxed. There are very few tax-preferred benefits available to employers- retirement and health/life/vision insurance are the big ones. And the health insurance is prized highly because there isn’t a cap on how much you can “pay” your employee (as there is with 401ks) and it is a direct benefit that the employee enjoys today.

                  People always over consume insurance because they don’t like taking risks even if the math is in their favor.

                  Yes, that and they also don’t have to worry about price. It is the standard Buffet dilemma and has been studied to the point that it isn’t even controversial. When people have already paid for an unlimited benefit (whether it is health insurance or an all you can eat buffet) they are going to consume it more. They don’t base these decisions on cost because they have paid the cost already.

                  Economists… blame the over consumption of health insurance on the tax system.

                  No they blame it on the All You Can Eat system of insurance that pervades the nation. The fact that we moved from a “Major Medical” system to a comprehensive healthcare system is what they blame on the tax system…because it is a complete artifact of the tax system.

                  1. Actually, yes I do pay taxes on my Vacation days. They are paid to me as salary and that salary is taxed.

                    But you don’t have to work for it. You are not paying on the benefit of not working for it. You could in theory accept a lower pay in return for more days off. Yet, most people don’t do that because they want the cash.

                    Yes, that and they also don’t have to worry about price.

                    People are not as stupid as yo uthink they are. They understand the policy costs and it comes with the price of having lower wages. And everyone pays some of their premiums anyway. But they still choose the best thing they can afford because they are naturally risk adverse.

                    No they blame it on the All You Can Eat system of insurance that pervades the nation.

                    And they are wrong. They assume that people wouldn’t really consume health care if only they knew the full cost. That is just bullshit.

                    1. You could in theory accept a lower pay in return for more days off.

                      I don’t think you understand what is really happening here.

                      As a business I can offer you $1 in health insurance and as an employee, you get $1 of health insurance. Or I can offer you $1 of Salary/Vacation/Sick pay and you get $1 MINUS taxes. So as an employee, I would rather have the benefit because I am getting more return on my labor. As both an employer and an employee, it is generally a better return to spend MORE dollars on health insurance than on more vacation pay.

                      Sometimes I get the feeling you argue for argument’s sake John, but this isn’t controversial. THE WHOLE REASON that employer sponsored health insurance started was because it was a way to pay employees “more” than wage controls would allow. This is because the cap was on salaries, not benefits. And it continues today because we tax salaries, not health insurance.

                      Your position seems to be that people are risk adverse, so most people will choose comprehensive health insurance over catastrophic. But this doesn’t square with reality. Most people don’t have comprehensive auto insurance that pays for 100% of their auto costs. Most people don’t even have warranties past the manufacturer warranty. If people were really that risk adverse, that wouldn’t be the case.

              2. The vast proportion of that cost was due to his hospital stay- essentially lodging. And that is a direct result of 90% of people- old or young- never having to price shop for hospital stays.

                No. That is the result of our tort liability system demanding gold plated care and the hospital assume every risk. It is also the result of hospitals being required by law to function as charity hospitals and treat everyone regardless of ability to pay. Get rid of that nasty 1986 Act and the price of a stay in a hospital would go way down. Your father was paying to subsidize the care of people who before that act would have been sent to charity hospitals.

                1. That is the result of our tort liability system demanding gold plated care and the hospital assume every risk.

                  While I have no love for the Tort system of today, you are missing a key contributor. Hospitals spend all sorts of (patients) money to reduce risk because there is no cost in market share. If they had to balance risk of lawsuits against the risk of people no longer affording their service, it would incentivise them to keep costs down. It isn’t like the Healthcare industry is the only industry that gets wrongful death lawsuits. Car companies do to, and so they make very specific decisions about safety improvements. Every improvement to cars or decision to recall is balanced against the risk that they have to increase car prices to keep in business.

                  Your father was paying to subsidize the care of people who before that act would have been sent to charity hospitals

                  The last time I looked about 5 years ago- and it could have changed- the costs of tort liability compared to the operating costs of providers is quite small. Most pay premiums on insurance to handle this, and those costs represent a few percentages of their overall budget. I agree that liability law is a problem, but it is no silver bullet.

              3. In any case, the Employer Sponsored Health Plan market is half of what is wrong with our healthcare in this country. Employers are incentivized to offer you wall-to-wall coverage because every dollar of benefit they provide you is untaxed instead of paying you money directly (which is taxed).

                And that was originally established to get around the wage controls of the Stabilization Act of 1942.

            3. It would be a disaster in health insurance because you need health insurance when you are old and sick. You could basically buy health insurance as long as you didn’t need it and once you did would be SOL.

              If every insurer did this, then nobody would buy insurance. The market pressure alone would likely force insurers to make contractual promises, which in turn would be enforceable in court.

              I think you are falling into the trap of thinking that somebody else owes you care just because you’re sick and desperate. Doctors are professionals, not slaves; insurers are risk hedges not magic money factories. You and everybody else can’t get $10 million worth of care after paying $500,000 in lifetime premiums.

              1. If every insurer did this, then nobody would buy insurance.

                Sure you would. Even if you were young, you would want to protect yourself against the small risk of getting sick. Again, people are risk adverse. And the insurance business is quite profitable if all of your customers are low risk.

                1. What you’re saying doesn’t make any sense. You are on the one hand claiming that people will buy it because they’re “risk-averse” and then on the other hand saying that it doesn’t actually mitigate any risk. Why would risk-averse people buying something that doesn’t mitigate risk? It seems like you’re just saying everybody is stupid then getting upset about being called on it.

                  1. You are on the one hand claiming that people will buy it because they’re “risk-averse” and then on the other hand saying that it doesn’t actually mitigate any risk

                    No I am not. i am saying it mitigates a small risk and is therefore going to be affordable. Just because you are don’t have a very high risk of using it, doesn’t mean there is no risk.

                    1. What is a small risk? Low chance of happening, low cost to remedy, or low expected value (= probability ? cost)?

                      If something is very likely to happen and very costly to remedy, then insuring against it is going to be really expensive. This is a reality that no amount of socialist or quasi-socialist meddling can truly hide away.

                      It looks like you are saying that the young and healthy must be forced to pay for the old and infirm. Beside the immorality of it, that only “works” as long the former population is larger than the latter. When (not if!) the balance starts to tip the other way, the whole system enters a death spiral.

                      Like anything, if you subsidize something (in this case, poor health), you will unsurprisingly get more of it.

        2. There is no way to tell and therefore no way for me to plan for or save for the cost.

          There is no way to tell which drivers on the street are going to get in a horrific car accident. But in large enough groups on a long enough timeline, you can fairly accurately predict how many of them will and what the characteristics of those drivers will generally be. That’s very basic insurance. It’s not as though insurance raises costs only in this one particular industry and distorts prices only in this one particular industry but somehow in every other line of business it manages to mitigate risk and unconstrain capital by indemnification.

          1. There is no way to tell which drivers on the street are going to get in a horrific car accident.

            Correct. That is why we buy insurance. And yes, insurance can be priced if you get a large enough group. Ultimately, insurance is priced by your risk. If you are a bad risk, it is expensive. If you are a bad enough risk, you can’t buy it for any price that makes economic sense.

            Indeed, there are people who can’t buy car insurance because they are such a bad risk. The government has to force companies to insure them at a loss and pass the cost onto the rest of us.

            Absent employee provided health insurance, the same would be true for health insurance only it would be even worse. You can by learning to be a good driver and being careful control your risk as an auto insurance client or eventually just get so old you are not able to drive anymore. You really can’t do that with health insurance. Eventually you are going to get old and sick and want insurance but won’t be able to afford it or forgo getting care.

            1. You are conflating employer-provided insurance with risk pooling/group rating. They are completely distinct concepts. Even so, yeah insurance should be priced according to risks that the insurer can predict. Do you think you should get far more care than you ever have or ever will pay for?

              1. You are conflating employer-provided insurance with risk pooling/group rating.

                No I am not. Employee provided health insurance by accident really created all of these risk pooling groups that wouldn’t have otherwise existed. That is why it saved us from single payer. Europe didn’t have that and people demanded single payer because they worried once they got old they would no longer be able to afford health care. In American they figured they were okay as long as they had a job. Indeed, the one area where America did go effectively single payer was for old people, the one group of people who didn’t have jobs.

                1. Now we’re supposed to adopt economically destructive policies because they’re less destructive than some arbitrary alternative?

                  If you’re saying that we have to stave off the demand for socialism by instituting fascism instead, then you’re arguing that we should bend over backwards for the mob, which strikes me as an extremely dangerous precedent to set.

                  1. But that wasn’t an economically destructive policy. It allowed people to buy health insurance for their entire lives. That is what you guys don’t get.

                    1. What you are profusely refusing to address and dancing around is how you expect to get more care than you ever paid for. The answer is that you expect somebody else to pay for it. In this case, the system “worked” because

                      a) it got people (young, healthy) to pay for more insurance than they needed in order to cover the people (older, sicker) who were paying for less than they were using; then
                      b) once a person became too costly, he would leave the workforce and enter public assistance of one form or another, which is again paid for by other people.

                      Basically, you like socialism in healthcare as long as it’s not too overt.

                    2. And yes, it was economically destructive. It drove prices up for people who didn’t have insurance, it bolstered the rolls of the actual socialist programs, it was predicated on labor and business models that were never correct to begin with and became more detached from reality as time went on, and it led to later, more destructive legislation like HMO and EMTALA.

                2. Europe didn’t have that and people demanded single payer because they worried once they got old they would no longer be able to afford health care

                  This is just untrue. We have had Major Medical and Catastrophic Insurance for eons. It isn’t hard to buy setup a policy that assumes a hockey stick of payouts and price it accordingly.

                  So people in Europe had these alternatives and they still created socialized medicine. It was because they wanted everything paid for, period.

            2. Eventually you are going to get old and sick and want insurance but won’t be able to afford it or forgo getting care.

              Eventually you are going to get old and sick and be unable to safely operate a car. Those people may be non-renewed or canceled, and yet still auto insurance is feasible, practical and society is better off for having access to it. The proportion of uninsurable individuals is just higher where it concerns medical insurance. It’s not as though the universality of death prevents life insurance from being feasible or desirable for consumers either.

        3. Pooling risk is not a problem for the market. Employer-provided coverage is not necessary for insurance to work. See life insurance, for example. On an individual basis, it is not any more predictable than healthcare costs, but the market works to efficiently spread that risk amongst willing participants. Other examples would include long term disability insurance, short term disability insurance, AFLAC-style supplemental insurance, etc.

          1. See life insurance, for example.

            Yes lets see it. See the entire paragraph I devoted to it and how health insurance would work just like it and that would really suck.

            1. that would really suck

              Life sucks. Doctors, nurses, pharmacists, etc. (may) make it better. But it’s not free.

        4. You’re completely ignoring the “mutual society” aspect of insurance companies, as they were originally developed. The 1971 closing of the gold window ruined a lot of limited-scope mutual societies – S&L’s among the most obvious. But this includes mutual insurance companies who suddenly had long-term investments stuck in an economy with high inflation. The only way to avoid bankruptcy in that environment is to demutualize and become a financial services company. But that totally changes the purpose of the association. You go from being a shareholder with equity in the company to a customer that is mostly a liability.

          But gold is the barbarous relic according to central planners.

          1. That is an interesting point. I will have to think about that. I assume you had to buy into the mutual assistance societies when you were young, right?

            1. The younger you are, the lower the risk and probably the best change at comprehensive insurance. I’m sure there were a wide variety of mutual insurance companies with varieties of coverage and risk/premium mixes.

              But forced insurance of any kind, whether it be forced coverage, forced premiums, etc. are always worse than the perceived problems such force tries to alleviate.

        5. The problem with heath care is not that there are not enough price indicators.

          I think this is the problem, actually. There are very few true market prices anywhere in healthcare. The entire business is a festival of distortions and broken markets.

          1. In a quest to end suffering, we have simply created more of it. Quelle surprise.

          2. Sure but getting rid of those would help it wouldn’t change the underlying nature of health care.

            1. it wouldn’t change the underlying nature of health care

              Which is no different than any other market. There are goods and services, there are producers, and there are consumers. The fact that there exist people who demand more of it than they are willing or able to pay for is not unique.

              “But people’s lives are on the line!” No. Your life and health are being artificially preserved and enhanced by the effective ministrations of others (or not, there is always malpractice and known risks). It is not some doctor’s fault that Mother Nature is out to get you. He’s trying to help, and you have a sense of entitlement.

              1. As I followed this conversation I kept waiting for someone to address the supply aspect of the debate vs. the government regulation of the costs and demand.

                Simply allowing for, or ensuring the, increase of medical schools would go a long way to lower the cost of healthcare. If there is an increase in the supply of healthcare and no governmental interference to restrict competition the cost of health insurance would go down.

    2. If the price of health insurance is not determined by the market, the information conveyed by prices will become useless and arbitrary and will create entirely new problems at an exponential rate.

      If the US’s pseudo-market health care was the last in the world, that means that the last price indicators for health care are gone and health care systems around the world are now free floating.

      How long will that last?

      1. Until the dead and ruined pile up too high for the lies and wishful thinking to conceal.

  6. Even if state regulators are willing to take action, however, there’s only so far they can go. Insurers cannot be forced to operate unprofitably for very long.

    Of course, just ask the airlines.

      1. Cities can run indefinite deficits, because taxpayers.

        /krugman

  7. Sure, just ensure the prices are artificially low. That will work. Just because doing that has resulted in shortages every single time it has been tried doesn’t mean it won’t work this time.

    1. You don’t understand. “Health care is not an economic good, it’s a right. So economics doesn’t apply to it. Concepts like ‘shortage’, ‘price’, ‘market’ and so on are evil impositions of ‘Neoliberalist’ views on how things should work in an ideal world.”

      This is actually what most of my ‘prog’ friends believe. Medical care (like education) is not a commodity but a right, and mechanisms that treat it like a commodity (‘commodification’) are evil Koch-imposed schemes to destroy the world and make poor people die. Read any random FB posting and you’ll find variations on this plaint.

      1. The idea that healthcare or education are “rights” is facilely destroyed by simply asking “well then who’s going to provide them?” What they really want is other people’s money. Healthcare and education are just excuses.

      2. Health care is not an economic good, it’s a right.

        So long as nobody is preventing you from getting health care, then your rights are protected, yes?

        Oh, what about health care you can’t afford? Well, you have a right to a lot of things you can’t afford. “Afford” has nothing to do with “rights”.

        Now, if you want services regardless of whether you can afford them, now we’re talking about having the government require people to work for you under threat of violence, yes? Sure you want to head down that road? Slaver?

  8. Obviously more central power is needed. /sarc for those whose meter is broken

  9. Obamacare’s regulations have helped drive up the cost of health insurance sold through the law’s exchanges. Now the Obama administration is, predictably, pushing states regulators to keep health insurance premiums down.

    Everything I know about economics, I learned from the Lone Biker of the Apocalypse:

    Price, it’s not what you say it is, it’s what the market will bear.

    1. As a kid I would blow all of my allowance on baseball cards and comic books. I’d even get the magazines that told you what the cards/books were worth. Whenever I’d tell my mom “Hey look, this card is worth $15.” she’d say “No, that card is only worth what someone else is willing to pay for it. Now go clean the litter box.”

      And that’s how I learned that most people are fucking retarded when it comes to economics, but not my mom.

      1. I spent years as an independent used car dealer.

        People not in the business were to point out the “book” value of the cars they were trying to sell to me, or buy from me, whichever suited their cause.

        My polite reply was, “then you should go buy/sell the car from/to the book”..

        1. I bet you didn’t have to tell them twice!

      2. I spent years as an independent used car dealer.

        People not in the business were to point out the “book” value of the cars they were trying to sell to me, or buy from me, whichever suited their cause.

        My polite reply was, “then you should go buy/sell the car from/to the book”..

  10. This is not a failure but a feaure. Obamacare’s main purpose was always to crash the existing healthcare system and force people to accept a government run single-payer one.

    1. The prospects for single-payer health care ? adored by many liberals, despised by private health insurers and looking better all the time to others ? did not die in the Affordable Care Act. It was thrown a lifeline through a little-known provision tucked in the famously long legislation. Single-payer groups in several states are now lining up to make use of Section 1332.

      http://www.seattletimes.com/op…..-not-dead/

      1. One of those groups is in Vermont. How is that working out I wonder?

        1. If you read the linked article, it singles out Vermont as a bright spot. Article date: Jan 2014. I enjoy going back to old, glowing prog predictions, like how homelessness was supposed to be gone in Seattle by 2013 because a task force said it would be. Worse than ever now.

    2. ]Sort of. First, Obama and the people who wrote this act were delusional and believed that insurance coverage was the same thing as medical care and that giving more people access to insurance and therefore care was going to summon the preventative care unicorn that would reduce costs and make everything okay.

      Second, the act was originally supposed to have a public option. The idea I think was to make private insurance unattractive and drive people onto the public option to such an extent that eventually it would turn into single payer by default. The problem was the public option couldn’t get through Congress. So, they passed it without the public option but without it going into effect until 2013. The reason they did this was they figured if they passed it the public would love them and reward them at the mid terms and in 2012 with bigger majorities and enable them to pass the public option later. When they got destroyed in 2010, they no longer had the ability to pass the public option and the whole thing became a ticking time bomb.

      1. There was another aspect; to use it to harvest email addresses of low income individuals to provide Democrats with useful data for their campaigning.

        I think people underestimate how powerful this tool will be in future elections. If they can get a 80% participation rate from a community that historically had say a 40% participation rate in voting, their plunging support rates among swing voters won’t matter much.

        1. It didn’t seem to work very well in the last three elections. Even the 2012 election was bad for the Democrats at the state level and Obama became the first President ever to win re-election with fewer votes. And 10 and 14 were outright disasters. I would think a system like that if it actually worked would have its greatest effect in off year elections when turnout is generally down and would prevent the kind of disasters the Democrats suffered in 2010 and 2014. So I am skeptical of this plan working.

          1. Who are you going to believe John, your political experience or my perfect & prescient prognostications (like that Al Gore was going to win the 2008 presidential election)?

            1. (like that Al Gore was going to win the 2008 presidential election)?

              He did. /Air America

      2. Had the public option passed, it would have turned out exactly the same way Washington State’s public option turned out: Insolvent.

        I haven’t read the exact details about how the public option was supposed to work, but my impression was it was the same idea as Washington had. Create a government-run ‘public insurance’ pool with low, affordable rates that you can’t be denied.

        Washington, discovering that it was heading for insolvency, raised rates dramatically, essentially throwing the poorest, sickest people off the plan after discovering that actually providing healthcare for below-market premiums is expensive.

        1. I am sure. I am not saying it would have worked. As I explain in the first paragraph, these people were delusional. I really think that was the plan, however.

        2. Washington (the state) doesn’t have access to the gobs of money and presses with which to print them that Washington t(the city) does.

          1. You know what other Republic whose name began with a ‘W’ printed their way to economic disaster?

            1. Wisconsin. And after the calamity guess who they elected?

    3. I don’t think progs planned it this way so-to-speak, but you are right this will become an acute problem after Barry leaves office, but by 2020 at latest.

      At that point the blame-everything-but-progtard stupidity will roll anew, and more prog stupidity will be the fix.

      1. The bad news for the Progs is that the government is broke. When it becomes a problem there will not be any money to enact single payer. Single payer is dead. It can never happen. The government will never enact another program of that scale again. There just isn’t the money available.

        1. The bad news for the Progs is that the government is broke. When it becomes a problem there will not be any money to enact single payer. Single payer is dead. It can never happen. The government will never enact another program of that scale again. There just isn’t the money available.

          Totally agree. I recall noting a few times that very problem driving the bill’s architecture back in 2010. All the goodies are front-loaded, all the shitties are back-loaded far away as they could make them; the standard prog-scheme approach.

          But the stoops couldn’t pull another Medicare or Social Security and kick the shitty part out a whole generation – actuarially that’s impossible even in prog-tard world. So this joke was what they could cobble together, and for once one sees the same architects of prog-shit administratively stuck with the shitty part arriving before they can ride off into the sunset and die before the problems come home to roost.

        2. The government has been broke for 60 years. Progs keep getting more power the deeper in debt the government gets. This is true world-wide, not just in the US.

          1. Progs keep getting more power the deeper in debt the government gets.

            Right up until they can no longer borrow money, anyway.

            And we’re getting there. We have two high-profile sovereign debt defaults right now (Greece and PR). Liquidity in the sovereign debt market is drying up.

            That leaves pure monetization of debt, which is already underway, and always, always, ends the same way: hyperinflation, economic catastrophe, destruction of currencies, and social upheaval.

            Will the progs come out on top after a massive collapse like this? I think its unlikely, to tell you the truth.

            1. Right up until they can no longer borrow money, anyway.

              Then the progressivism really kicks in. Capital controls, rationing, and seizure of assets.

              Will the progs come out on top after a massive collapse like this? I think its unlikely, to tell you the truth.

              Funny you don’t even mention Venezuela and Argentina.

              I’m not expecting free market capitalism to expand in Greece in any form (other than black market), I expect the opposite. Maybe after a vicious civil war a la Nazi Germany spills into neighboring countries, then maybe I can see free market capitalism return as people would be sick to death of government control, but right now voters in Greece want even more government control over their “fellow” citizens.

              The return of free market capitalism in West Germany barely lasted thirty years post WWII, the lust for central planning is strong there despite the Bundesbank’s seemingly sticking to principles; they slowly give in to progressive demands that by definition are never ever satisfied.

            2. “Right up until they can no longer borrow money, anyway”

              Silly boy. The US is special. We don’t have to borrow money. We can just create more at the push of a button. Besides, most of the money we owe, we owe to ourselves.

              /Krugman paraphrased

            3. “Will the progs come out on top after a massive collapse like this? I think its unlikely, to tell you the truth.”

              Unfortunately I have to disagree with you. It depends upon who is incontrol of the Government and Armed Forces when the shiiite really hits the fan.

              Look around world history and a promise of a “free chicken” in every pot draws a lot of attention when people are hungry for food, not just a new free cell phone.

              I don’t know if I want the crash to be delayed until I am gone or if being hungry but being able to say , ” I told you so” is worth it.

              Obama’s people were floating the idea of seizing private retirement accounts the day after his inaguration. It hasn’t gone over so well because many of his supporters are wealthy cronyists therefore the idea has stayed on the down low.

        3. “There just isn’t the money available.”

          Silly boy. Money can be created very cost efficiently at the push of a button.

          / Krugman paraphrased

        4. “There just isn’t the money available.”

          Silly boy. Money can be created very cost efficiently at the push of a button.

          / Krugman paraphrased

      2. Hillary will certainly have a full plate after her inauguration.

  11. their new customers under the Affordable Care Act turned out to be sicker than expected.”

    Poppycock. Those people are finally being provided the health care which has for so long been denied them.
    Praise our Ascended Master, and rejoice!

    1. What’s funny about this law is that it’s a black-letter example of turning out exactly as we predicted it would, and everyone in the administration and the dem-op media just keeps raising their voices while they discuss solutions and tweaks, so they don’t have to hear us from the peanut gallery saying “we told you so”.

      1. It’s no accident that Cassandra ended up stabbed to death.

  12. “…their new customers under the Affordable Care Act turned out to be sicker than expected.”

    But Obo PROMISED that people would turn all ‘new soviet man’ and get all sorts of preventative care that would make them healthy and stuff!

    1. True Communism by 1985 2085.

  13. It’s clear that Suderman didn’t pay his alt-text premiums.

    1. I guess what I’m saying is, access to alt-text is a human right.

  14. I was just chatting with my boss today, and made the observation that we are following a classic death spiral so far.

    Year 1 – nobody knows what their risk pool will look like, prices lowish for market share.

    Year 2 – risk profile coming into focus, but pricing is still lowish.

    Year 3 – risk profile well established, prices rise.

    Year 4 – high prices, low-risk people start exiting. This is where we are now. The question will be whether enough people exist for 2016 to really concentrate risk and drive even bigger increases.

  15. Peter, should we file this new prediction of yours along with some of your others? You know, the young will not be signing up, and the uninsured will ignore it…those were hilarious in their lack of prescience. Probably this one as well.

    1. What about those predictions hasn’t proven true, at least in the numbers predicted necessary to make it work ?

      It seems to be the only people who are happy with O’care are those with zero premimums and zero co-pays.

      And besides, what kind of convoluted plan, where a multi millionaire in assets ( almost negative interest rates on savings ) but low income can get their health insurance costs paid by working people with income but no assets, should work in the first place.

      That’s right. Someone with a half a million dollar home paid for and a half a million dollars in the bank, and as many paid for cars as they want, can get the health insurance paid for by others with no saving and no paid for assets but who do have a good paying job ?

      Only an idiot or an evil MF could have dreamed this up or support it.

  16. Again, medical “care” is NOT insurance! You pay someone for help with your problems and they fix them. Like a plumber, like a mechanic, like a barber. Get the govt out of it completely, and allow free-enterprise competition.

    Here in Mexico, we have doctor visits for as low as $1.50 US dollars. Most medical prescriptions and lab-tests are PRESCRIPTION-FREE. I had a double cataract operation for $1400 total including 2 nights in a hospital and all tests etc.

    Tell the govt. and the AMA to “get out of it, and leave us alone.”

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