Killing insurance

Prez’s promises a death knell

In his Wednesday speech, President Obama fired up the troops on the urgency of reducing the number of uninsured in this country and achieving universal coverage via insurance regulations and forcing all Americans to buy insurance.

Under his plan, insurers would be faced with “guaranteed issue” and “community rating.” In other words, they wouldn’t be allowed to deny insurance based on a pre-existing condition, take coverage away in the middle of a treatment, set a premium based on one’s medical history or set lifetime caps on coverage.

If there were a “guaranteed issue” law for fire insurance, no one would buy coverage unless his or her home was actually on fire. We’d see the same “negative selection” under the Obama plan: Lots of people would simply avoid buying insurance until they got sick. After all, if you can’t be turned down when you are sick, why bother wasting money on insurance when you don’t need it?

Sick patients cost more, of course. Insurance premiums would gradually get more and more expensive, because the only people in the insurance pool would be ill.

Community rating would have a similar impact, because insurers would be forced to charge the same prices to the sick and the healthy, to smokers and non-smokers, and to the obese and those who are fit.

Such measures guarantee that all customers will end up paying higher prices. The average state-level mandate for community rating hikes premiums by over 10 percent. The average guaranteed-issue ordinance drives up premiums a whopping 227 percent.

This has proved to be the case in the states of New York and New Jersey — which have the highest insurance rates in the nation. As a result, the young and healthy forgo purchasing insurance because it is a bad deal for them as they have few assets and are not likely to face a catastrophic illness.

Obama also noted that he’d force insurers to include certain benefits in every plan — including preventive procedures such as colonoscopies and mammograms. This, too, would drive up premiums.

For evidence, consider the impact that such “mandated benefits” have had at the state level. As of 2007, the average state had 38 benefit mandates. These mandates raise the premium of a basic insurance package anywhere from 20 to 50 percent, according to the Council for Affordable Health Insurance.

All this government meddling will force private insurers to raise prices to levels that simply won’t be competitive. That brings us to Obama’s support for the “public option” — government coverage that competes in a “national insurance exchange” with private insurers.

The government-run public plan won’t have to resort to unpleasant options like hiking prices to cover its costs. It will be able to tap the public purse to keep prices artificially low. Unlike the federal government, private insurers don’t have the luxury of operating at a loss for long.

Understandably, customers will flock to the lower-priced government alternative. Private insurers will slowly exit the marketplace as they find themselves “crowded out,” or unable to compete with a government plan that has tilted the rules in its favor.

Before long, the government “public option” will be the only game in town.

This “crowd out” process will happen at a faster pace because the president also insists that employers must provide their employees with health insurance — or pay an extra payroll tax to offset the cost of signing their employees up for the new public plan.

Thing is, with health insurance already quite expensive, employers will jump at the chance to offload those costs onto the government. The Lewin Group estimates that 119 million workers will be shifted to a public plan if Congress passes an employer mandate.

No matter how many times Obama says, “If you like your health insurance, you can keep it,” that won’t be true for any of the millions of us whose employers drop their plans.

All summer, people across the nation have told their legislators at town-hall meetings that they’re not interested in moving toward a Canadian-style, government-run, single-payer health-care system — replete as any such system must be with higher taxes, waiting lists and rationed care.

But that’s exactly what we’d get under the Obama plan. As Rep. Barney Frank (D-Mass.) told a reporter, “The public option is the path to a single-payer system.” This is the long-term vision of many Democrats and, I believe, the president.

One of the first lessons medical students learn is, “First, do no harm.” If the president and Democrats in Congress give us a law like what he’s told us he wants, the public will be quite harmed indeed. We will be on our way to “Medicare for All.”

Sally C. Pipes is president and CEO of the Pacific Research In stitute. Her latest book is “The Top Ten Myths of American Health Care: A Citizen’s Guide.”

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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