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April 12, 2010

Straws in the wind (part three)

Health insurance reforms in Massachusetts are encountering some problems.

Rather amazing--at least to me--the very liberal Boston Globe has been running about a story per week on the problems with health insurance in the state.

Short-term customers boosting health costs".

Thousands of consumers are gaming Massachusetts’ 2006 health insurance law by buying insurance when they need to cover pricey medical care, such as fertility treatments and knee surgery, and then swiftly dropping coverage, a practice that insurance executives say is driving up costs for other people and small businesses.

"Health care hikes rejected".

The rulings, following a review process set in motion by emergency regulations Patrick filed in February, mark the first time the state has used its authority to turn down health premium increases. The action immediately sent ripples through the state health care industry.

Insurers said it would usher in an era of price controls, and vowed to appeal to the state or through the courts — a process that could drag on for months.

"Health tax may wallop towns". (Link courtesy of Phil Miller.)

Massachusetts municipalities that offer employees, retirees, and elected officials the most generous and costly health insurance plans will feel the squeeze of the new national health care law’s tax on “Cadillac’’ insurance plans.

And there have been a number of other commentaries recently, too.

Rich Lowry: "Obamacare's already had a disastrous preview".

"Massachusetts Health Insurance 'Market' Just Failed, And There’s Worse to Come". 

But of course, the designers of the health insurance market never assumed that all suppliers might react to a negative decision by withholding supply and creating a shortage. They expected the market to drive prices down to marginal costs, but it didn’t. Now what?

In California, when the Governor and PUC failed to understand this problem, that convinced lots of electricity suppliers to withhold power from the market, causing artificial shortages. The State dug in its heels, the market collapsed, and the lights went out because many suppliers refused to operate without being paid. [Different generators were withholding for different reasons, some legitimate, some not.]

"Can Massachusetts' Experiment Tell Us What’s Next?"

After three years, no real progress has been made on rising costs. The program remains well over budget, with no end in sight. Further, state residents who now must buy state-sanctioned coverage are bristling at their rising premiums and the inability to find coverage which covers less and thus costs less.

State politicians are responding to the cost crisis the only way they know how: by promising to impose arbitrary caps on premiums and price controls for medical services. The governor and state regulators have disallowed 90 percent of the premium increases insurers --all of whom are not-for-profit--submitted for their enrollees for the upcoming plan year. The state says premium increases above eight percent are too high and unacceptable, though they themselves don’t have a plan to make health care more efficient in Massachusetts. They just want lower premiums. The insurers have responded by refusing to sell any coverage at the rates the state wants to impose.

The way out of this stand-off is predictable: more price controls. To hold premiums down, Massachusetts officials are already laying the groundwork to impose government-set payment rate schedules for services beyond the realm of public insurance.

In a breathtaking scene from The Sopranos, an elderly man tells Carmela: "You can do what you want. But you can never say you weren't warned."

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