Insurance is a complicated product. Even President Obama figured that out. Hundreds of highly trained actuaries spend thousands of hours assembling risk pools to determine premium levels, underwriting standards, and product offerings. Investment managers spend thousands more trying to match financial assets acquired from those premium payments with long term liabilities to guarantee coverage promises can be kept. Get it right and you are rewarded with a stable company with stock suitable for widows and orphans. Get it wrong and your business dies.
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When it comes to health insurance, however, this finely tuned balance has now been completely destroyed, culminating years of political meddling. And for its final Christmas present of a year that will go down as the worst in insurance history, the Obama Administration unilaterally waived yet another key provision of the Affordable Care Act.
Four days before the deadline to sign up, the Department of Health and Human Services told people with cancelled plans facing Obamacare Exchange sticker shock they can now buy cheaper “catastrophic” plans after all—at least until the 2014 midterm elections. This, along with a dozen other changes voted on by exactly zero legislators, may well be the last nail in the coffin of commercial health insurance. The insurers themselves may not admit it, but they are the walking dead.
Richard Cloward and Frances Fox Piven could not have designed a better strategy to catalyze the collapse of the private insurance market, paving the way for single-payer nationalized health insurance—which remains the stated goal of both the president and many members of Congress. Despite Politifact’s award of “Lie of the Year” to President Obama’s claim that you could keep your existing insurance, there is no reason not to take these people at their word when it comes to their long sought objective. What champions of progressivism couldn’t get through legislation they appear determined to achieve through faulty execution.
The “bungled” ObamaCare rollout will not be fixed when the website is finally debugged. Premiums, products, underwriting standards, and financial assets and liabilities cannot possibly be matched under a command-and-control regime that makes ad hoc changes driven solely by political considerations. A system better designed to collapse upon itself could hardly be conceived.
Insurance company executives have no one to blame but themselves. Rather than fight the passage of the Affordable Care Act, as they did with Hillarycare during the Clinton administration, they made the proverbial deal with the devil, lured by a law that promised to command every citizen to buy their products. But they forgot one thing.
While politicians love making backroom deals with crony capitalists, they cannot be forced to honor their side of the bargain. Government bureaucracies are often partners in a scheme to loot the public one day, just to turn on their erstwhile cronies the next. Ask Jamie Dimon how that works.
If we stay on our present course, bankruptcy, bailouts, and nationalizations lie ahead—except for insurers smart enough to quietly withdraw from the market, as many are already doing. Insurance companies that remain will end up little more than public utilities providing contract entitlement administration.
In the end, a two-tier system is inevitable. One will be a national health service, free to all, staffed by civil servants. VA Hospitals are probably the closest model. Health care will be rationed, choices will be limited, waiting lists will be long, quality will be marginal, and innovation will grind to a halt. Yet progressives will tout this as nirvana, much like they do Cuba’s healthcare system, framing the narrative around the rubric of “equality.”
Yes, a national health service will deliver equality—just as effectively as the Post Office or your local DMV. The biggest difference is that it will lose a lot more money. And the need to “reform” it every few years will guarantee our politicians a steady flow of campaign donations.
A private alternative will eventually emerge from the wreckage of the insurance industry, when a new administration finally decides to clean up the mess now being made by the current one. Concierge doctors, elective surgeries, high-impact procedures, heavily rationed services, alternative medicine, and advanced therapies not yet included in the public plan will be purchased out-of-pocket, supplemented by high deductible catastrophic insurance.
The latter, when it emerges through some future act of deregulation, will be real insurance and not a cover story to engage in massive income redistribution. Employers will have nothing to do with it, just as they have nothing to do with car insurance despite the fact that most of their employees drive to work. Pity we can’t just jump straight to the answer rather than drag our moribund economy through additional years of uncertainty and chaos.
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