How ObamaCare Is Destroying Consumer Protections
In this morning’s Charlotte Observer, I explain how ObamaCare is destroying consumer protections. Exhibit A is Blue Cross Blue Shield of North Carolina’s decision to refund $156 million to its policyholders:
BCBSNC’s refunds show that ObamaCare is leaving seriously ill patients with less protection, not more. Health insurance was hardly perfect before ObamaCare, but BCBSNC’s policyholders had insurance that had pre-funded many of their future medical bills.
Now, ObamaCare has effectively transferred those reserves from the sick to the healthy. Seriously ill policyholders now have less protection against BCBSNC reneging on its commitments to them. Competition used to discourage skimping; ObamaCare rewards it.
Due to space considerations, the editors dropped the parts where I explain (A) how research by Harvard economist (and sometime Obama advisor) David Cutler shows that under ObamaCare’s price controls, insurers must compete to avoid the sick, and (B) that ObamaCare is blocking further innovations — such as those foreseen by University of Chicago economist John Cochrane — that would provide even greater protection to the sick.
ObamaCare Leads Minnesota Insurers to Suspend Sales
From the Minneapolis Star-Tribune:
Two of Minnesota’s biggest health plans said Thursday they have temporarily suspended sales of individual health insurance policies because of uncertainty related to the new federal health reform law.
The moves by Blue Cross and Blue Shield of Minnesota and HealthPartners came on the same day some of the federal government’s most-heralded consumer protections came into effect…
The insurers that have suspended individual sales say they are awaiting guidance on new rules, including those around coverage of kids with pre-existing conditions…
Pam Lux, a spokeswoman for Eagan-based Blue Cross, said she expects the suspension of individual sales to be brief but could not say if it would be days or weeks.
Many Supporters Not Willing to Trumpet ObamaCare’s Achievements
An interesting update on the politics of ObamaCare appears in CongressDailyPM (subscription required):
The marking of six months since the signing of the healthcare law should be a moment of celebration by Democrats, especially as several popular provisions go into effect today. But the political realities of the midterm elections have made trumpeting the law, which remains unpopular with large swaths of the electorate, a delicate balancing act for Democrats…
House leaders tell their members to address the healthcare law in a way that best suits their districts…
some Democratic members in the House and Senate instruct staff not to write talking points on the law’s six-month provisions…
a former administration official questions if Democrats’ efforts to sell the bill are making any significant headway…
It’s little wonder, really.
But still. Wow.
Filed under: Cato Publications; General; Government and Politics; Health Care
ObamaCare’s First Adverse-Selection Death Spiral
This is what happens when government price controls limit insurance companies’ ability to set premiums according to risk:
Note that this adverse-selection death spiral happened before ObamaCare‘s price controls on child-only coverage even took effect. (Of course, President Obama never calls them price controls. He calls them “consumer protections.” Some protection.)
ObamaCare supporters are in full-blown denial:
“We’re just days away from a new era when insurance companies must stop denying coverage to kids just because they are sick, and now some of the biggest changed their minds,” Ethan Rome, executive director of Health Care for America Now, an advocacy group, said in a statement. “[It] is immoral, and to blame their appalling behavior on the new law is patently dishonest.”
I’d say that brave new world is already here.
ObamaCare supporters can take comfort in this: since it might take healthy people a while to figure out that they’re better off financially if they drop their coverage and pay the individual-mandate penalty, ObamaCare’s health insurance exchanges might not collapse before their January 1, 2014, launch date. They could last until January 2.
Administration Reform Plan Misses the Mark
The Obama Administration is presenting a misguided, ill-informed remake of our financial regulatory system that will likely increase the frequency and severity of future financial crises. While our financial system, particularly our mortgage finance system, is broken, the Obama plan ignores the real flaws in our current structure, instead focusing on convenient targets.
Shockingly, the Obama plan makes no mention of those institutions at the very heart of the mortgage market meltdown – Fannie Mae and Freddie Mac. These two entities were the single largest source of liquidity for the subprime market during its height. In all likelihood, their ultimate cost to the taxpayer will exceed that of TARP, once TARP repayments have begun. Any reform plan that leaves out Fannie and Freddie does not merit being taken seriously.
Instead of addressing our destructive federal policies aimed at extending homeownership to households that cannot sustain it, the Obama plan calls for increased “consumer protections” in the mortgage industry. Sadly, the Administration misses the basic fact that the most important mortgage characteristic that is determinate of mortgage default is the borrower’s equity. However, such recognition would also require admitting that the government’s own programs, such as the Federal Housing Administration, have been at the forefront of pushing unsustainable mortgage lending.
While the Administration plan recognizes the failure of the credit rating agencies, it appears to misunderstand the source of that failure: the rating agencies’ government-created monopoly. Additional disclosure will not solve that problem. What is needed is an end to the exclusive government privileges that have been granted to the rating agencies. In addition, financial regulators should end the outsourcing of their own due diligence to the rating agencies.
The Administration’s inability to admit the failures of government regulation will only guarantee that the next failures will be even bigger than the current ones.
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