A Health Care Debacle…
April 18, 2010 1 Comment
Coming to an insurance office near you. Massachusetts is having some serious issues with its insurance system and extensive government regulation. The Massachusetts system has been praised as having provided the structure of the Obama Health Care Reform. Therefore it is only logical that we find ourselves looking at the Massachusetts system and its problems as a precursor of things to come as we move towards full insurance coverage.
What has happened is that Governor Patrick has imposed price controls on insurance premiums in the small group market. In Massachusetts any increases in premiums must be approved by state regulators and Governor Patrick kicked off his reelection campaign by summarily rejecting 90% of insurance company requests for premium increases.
The despicable aspect of this move is that it is a political stunt, pure and simple. Governor Patrick’s opponent in the November election will most likely be Charlie Baker, a former Executive at Harvard Pilgrim, a health care provider. The political logic is simple: tell insurance companies no price increases, they stop selling insurance, turn to the people and say “Look, Charlie Baker ran insurance companies that are now refusing to sell you insurance as the law requires! Do not vote corporate greed into office!”
The result of these price controls is that the entire small business and individual health insurance market has been shut down as companies wait out the result of a pending court hearing. They have argued that an arbitrary cap will result in more than $100 million in losses and threaten their solvency. 3 of the 4 largest insurance companies in Massachusetts are nonprofits and run the risk of collapsing if they are unable to meet the cost of claims.
Since the Massachusetts insurance system was put in place health care costs have skyrocketed. Interestingly enough the requirement to allow everyone who applies the opportunity to receive health insurance has resulted in gaming of the system. Blue Cross Blue Shield has reported they are tracking short-term customers who get on the system, immediately rack up costs on average 600% higher than normal, and three months later drop insurance all together. Harvard Pilgrim has reported that 40% of new enrollees stay for fewer than 5 months and rack up costs north of 600% above average.
The Massachusetts problem is a microcosm of what America is in for if Obamacare is allowed to come completely online. Massive health care regulation is not going to result in decreased premiums and health care costs. Allowing the markets to work with less government regulation will.