Obama & Pelosi’s Gift to Health Insurance Industry

Sheldon Richman lays out why the health care “reform” package approved by the U.S. House Sunday night is a big gift-wrapped present to the health insurance industry:

Note that the attention of nearly all the “reformers” is on the insurance industry. What ostensibly started out as “health-care reform” quickly became health-insurance regulation. A common theme of all of the leading proposals is that insurance companies have too few restrictions on them. So under Obamacare, government will issue more commands: preexisting conditions must be covered; policy renewal must be guaranteed; premiums may not reflect the health status or sex of policyholders; the difference between premiums charged young and old must be within government specs; lifetime caps on benefits are prohibited, et cetera.

In return for these new federal rules, insurance companies are to have a guaranteed market through a mandate that will require every person to have insurance. So what looks like onerous new regulations on the insurance companies turns out to be a bargain they are happy to accept. Instead of having to innovatively and competitively attract young healthy people to buy their products, the companies will count on the government to compel them to do so. Playing the populist role, Obama & Co. bash the insurance companies, but in fact the “reform” compels everyone to do business with them.

What about this would the insurance companies dislike? Health insurance is not the most profitable business you can be in; the profit margin is 3-4 cents on the dollar. So a guaranteed clientele is an attractive prospect. The people who will be forced to buy policies are the healthy, who will pay premiums and make few claims. The only thing the companies don’t like is that that penalty for not complying with the mandate is too small. Many young people may choose to pay the penalty rather than buy the insurance because it will be cheaper. But that presents a problem: when the uninsured get sick and apply for coverage, they won’t be turned down because that would be against the law. So look for harsher penalties in the future to prevent this gaming of the system. The insurance companies win again.

Indeed, Blue Cross Blue Shield of North Carolina has already proclaimed the House’s approval as a “positive step.” On Wall Street, health insurers and big pharma were big winners on Monday, the only industries to see gains that day. Big Pharma also voiced their approval for the House’s passage of the bill, after dropping millions in advertising in support for the bill.

Over the past year, “progressives” tried to convince the public that the people opposed to Obamacare were somehow in the pocket of health insurance or pharmaceutical companies. But the facts are in, and it is quite obvious that the progressives were flat-out lying.

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