President Obama seems to have backed off of his plans for a government insurance program to compete with the private sector. Instead, he’s doubling down and proposing something much more radical: having the federal government set the rates of private insurance companies!
President Obama will propose on Monday giving the federal government new power to block excessive rate increases by health insurance companies, as he rolls out comprehensive legislation to revamp the nation’s health care system, White House officials said Sunday.
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By focusing on the effort to tighten regulation of insurance costs, a new element not included in either the House or Senate bills, Mr. Obama is seizing on outrage over recent premium increases of up to 39 percent announced by Anthem Blue Cross of California and moving to portray the Democrats’ health overhaul as a way to protect Americans from profiteering insurers.
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The president’s bill would grant the federal health and human services secretary new authority to review, and to block, premium increases by private insurers, potentially superseding state insurance regulators. The bill would create a new Health Insurance Rate Authority, made up of health industry experts that would issue an annual report setting the parameters for reasonable rate increases based on conditions in the market.
This would, in effect, turn private health insurance companies into public utilities. And, while that makes some sense in the case of monopoly providers for vital services where efficiencies won’t allow multiple competitors — multiple power grids and the like are not feasible — it’s truly a bizarre idea in a field, such as health insurance, where dozens of providers exist and the barriers to entry for other competitors are relatively low.
One hopes this is just a radical first offer designed to make a “meeting in the middle” more favorable than it would be with a more reasonable starting point. The obvious solution to the problem in question — and it is a real problem in situations where one or two providers control the business in a large area — is to remove the current barriers to competition across state lines.
