Health Insurers and Their Faustian Bargain

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Paul Hsieh, a doctor, argues that insurers have made a Faustian bargain. They supported ObamaCare in order to get more customers, and now they're finding that once you pay the danegeld, you never get rid of the Dane:

When South Dakota and Kentucky passed similar "guaranteed coverage" and price control laws several years ago, many insurers left these states rather than slowly be bled to death. Implemented nationally, ObamaCare could drive many insurers out of business altogether. In essence, private insurers would survive only at the arbitrary pleasure of the government. And the bureaucrats' whims can be arbitrary indeed.

When insurers recently pointed out that ObamaCare did not actually require them to immediately offer coverage for certain children with preexisting conditions, Secretary of Health and Human Services Kathleen Sebelius immediately threatened to issue regulations forcing them to do so -- regardless of the actual letter of the law.

And Congress is now seeking to expand the newly-passed ObamaCare legislation to give federal regulators the same power as Massachusetts state regulators to veto proposed insurance rate increases unless federal officials considered them "reasonable."

ObamaCare thus places a noose around private insurers' necks. Insurance companies will be required to offer numerous benefits determined by politicians and lobbyists. But they will be allowed to charge only what government bureaucrats permit. No business can survive long if it must offer $2,000 worth of services to customers but can charge only $1,000.

Although it is tempting to take delight at the insurance industry's self-caused plight, the inevitable collapse of the private insurance market would also leave millions of Americans without coverage. Even though this crisis would be caused by government policies, liberals would gleefully portray it as a "failure of the free market" and demand that the government "rescue" health care.


The problem is that Obamacare promised too much:  universal coverage, and no rationing, and lower costs.  Now government is left mandating the impossible (and no, Europe hasn't found some magic way to do this--David Cutler, one of Obama's former advisors on healthcare, told me in an interview a few months back that "they all ration".)  But eventually we're going to have to actually make a choice, not merely command companies to some how make this mess work.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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