Massachusetts’ experiment with a form of Obamacare is failing, with the state’s insurance companies in terrible financial trouble because of the heavy hand of politicized premium regulation. From the story:
The four major Massachusetts health insurers yesterday posted first-quarter losses totaling more than $150 million, with three of them blaming the bulk of the losses on the Patrick administration’s decision to cap rate increases for individuals and small businesses.The carriers attributed $116 million of their $152 million in losses to the April 1 ruling by the state Division of Insurance to deny most proposed premium increases for the so-called small-group market. That category covers 800,000 residents who are self-insured or employed by companies with 50 or fewer employees.
Yesterday’s financial reports renewed the dispute between state officials, who say they are protecting consumers from excessive rate hikes, and the health insurance industry, which complains it is being unfairly blamed for surging medical costs and being forced to sell policies at rates that cause them to lose money. “The health plans are not collecting enough premiums to cover their costs,’’ said Lora Pellegrini, president and chief executive of the Massachusetts Association of Health Plans. “These results support what we’ve said: that the plans would lose millions of dollars from this scheme and it would do nothing to control underlying health care costs.’’
Many will say that such corporate “greed” is why we should go single payer, which, I think is the ultimate point of Obamacare–grab control of the practices of the entire sector, and then, break the spines of private insurance companies so that the only thing left will be the government. But who will bail out the government?
These are non profit companies in Massachusetts. But that doesn’t change the laws of economic nature. When underwriting is disabled, and the government injects politics–which it always will–the result is predictable.
I used to be single payer supporter myself, but I came to the reluctant conclusion that it leads to rationing of the politically weak–never the connected–and bureaucratic unaccountable mismanagement. Alas, centralized control always seems to lead to systemic torpor, while increased competition leads to greater innovation as to policy terms and price–particularly if we can introduce some price competition in the medical sector itself.
I believe the only hope to maintain relatively affordable and accessible health care–based on Hippocratic values– is unleashing the creativity of competition. I don’t want it to be true, but it is.
May 25th, 2010 | 10:51 am
Ah, you’ve hit the nail on the head, Wesley. I too would prefer it not to be true–but it is.
May 25th, 2010 | 10:57 am
The government should never have the ability to restrict businesses and commerce in such a way. This whole mess is just disgusting.
May 25th, 2010 | 11:03 am
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May 25th, 2010 | 11:17 am
Has Will Ferrell started his health insurance company yet? You know, the one where he DOESN’T hire greedy health insurance executives?
May 25th, 2010 | 11:24 am
Good, lets hope that the health insurance companies go out of business.
Single Payer is NOT Socialist Medicine. Sosialist Medicine (like in the UK) is a situation where the government both owns the hospitals and hires the doctors. No competition, little or no incentive to innovate.
What we currently have is competition between insurance companies that compete to provide less survice and make more profits at the expense of patient health.
With Single Payer everyone pays a 2 to 3% increase in taxes, but there are NO monthly premiums, no insurance company, and NO money going to pay do-nothing shareholders. It costs less! Competition will then be between doctors who compete to provide BETTER care, not less of it.
Under our current system doctors do not compete to provide better care, because the insurance companies have contracts with the docs to pay them less per patient visit, with the understanding that the insurance companies will be funneling them patients. A completely unnecessary provision that undermines the doctor patient relationship and costs our country too much money for no benefit.
Wesley J. Smith Reply:
May 25th, 2010 at 1:32 pm
Well, at least we agree on the game that is afoot, Laurent Colvin.
May 25th, 2010 | 11:41 am
Incidently, if Massachusetts still has insurance companies then they do not have a Single Payer system. It seems erroneous to evaluate a Single Payer system on the basis of how an insurance madate functions.
So long as insurance companies are siphoning off money then the patient’s, doctor’s and hospitals will suffer. Insurance companies add no benefit to the equation.
Wesley J. Smith Reply:
May 25th, 2010 at 1:00 pm
Laurent Colvin: You didn’t read the post very carefully. I wrote that the insurance companies in MA are now all non profit–and that heavy handed state regulation is endangering these companies. That is the intent of how MA is being run and of Obamacare–to force us into a single payer system.
May 25th, 2010 | 6:20 pm
Wesley, great post, and I share your concerns about the potential problems of single-payer. The problem is that the present system of private health insurers is also ultimately politically unsustainable. The temptation will always be there—and obvious for members of the public to see—for health insurance companies to ration and deny care for profit and huge executive salaries. And the bureaucracies and limitations appear to be no better with our for-profit system.
We should find a way to cover everyone, at least for catastrophic illnesses and accidents, even if we don’t have a single-payer system ultimately. I believe we can all agree that this is where our present system fails miserably. No one should have to file bankruptcy, go broke, lose a house, etc., from a major medical catastrophe or chronic expensive health problem, but it happens every day. That, too, is unsustainable and it must change.
Perhaps in all this is the source of some compromise…
May 26th, 2010 | 11:07 pm
Massachusetts is notorious for this kind of over-regulation of insurance. As an actuary in the 1980′s, I saw insurers avoid Massachusetts because of their policies — they could not make a profit even with investment income on policies written in Massachusetts. It looks like they never learn their lesson.
May 27th, 2010 | 12:18 am
Health care can be as cheap or expensive as we want it to be. Squirrels spend absolutely nothing on health care, yet they thrive. We probably can’t achieve their zenfull living, but we can approach it by needing only ordinary, basic medicine, and eschewing further innovation.
I agree with Laurent, it’ll be good when all the insurance workers stop driving to their unnecessary jobs and stay home to tend to their homes and family.
May 27th, 2010 | 12:22 am
Laurent, insurance companies benefit rich people who don’t want to lose their wealth if they get sick. It’s wealth insurance, not health insurance. They don’t even pay taxes on the income they spend on wealth insurance.
May 27th, 2010 | 1:13 am
Laurent Colvin says
“under our current system doctors do not compete to provide better care, because the insurance companies have contracts with the docs to pay them less per patient visit, with the understanding that the insurance companies will be funneling them patients.”
My wife works in the healthcare field and the only time she has experienced what you are describing is with medicare.
John Howard
My wife and I are not wealthy but we are still paying for student loans, health coverage, 2 children, taxes, etc… and yes it is nice after all of the hardwork in a year to have a little tax relief for some of that. If we do get sick then our whole family suffers for it so we have incentive to maintain good health based on our commitments. There are already insurance workers who do not have to drive anywhere daily thanks to the internet.
May 27th, 2010 | 10:00 am
John Howard:
“Squirrels spend absolutely nothing on health care, yet they thrive. We probably can’t achieve their zenfull living, but we can approach it by needing only ordinary, basic medicine, and eschewing further innovation.”
I have squirrels living in my backyard. Their “health care plan” is that when age or sickness slows them down, they get picked off by predators, or crawl into a hole to starve. I expect something better for myself, frankly.
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