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Do They Need the Public Option?

Much discussion of the House Democrats’ health care bill has focused on its inclusion of the “public option,” which most observers see as a Trojan Horse intended to serve, ultimately, as the vehicle for socialized medicine as private insurers are driven from the market–a process that President Obama has said may take ten to twenty years.
What strikes me as I read the House bill, however, is how closely it approximates socialized medicine even without the public option. The bill is classic national socialist legislation, in that it takes ostensibly private entities, the health insurance companies, and perverts them into instruments of the state, run top-down and barred from competing among themselves.
Under the House bill private health insurance companies will still exist, but to what end? They will be legally prohibited from competing in any meaningful sense. They will be required to issue substantially the same coverages at substantially the same rates, changes in which must be justified to the government. They will be prohibited from underwriting insurance risks in any rational way: they must pay all bills resulting from preexisting conditions, and they will be prohibited from charging lower-risk customers lower rates.
As I wrote here, you can force insurance companies to “cover” preexisting conditions, but the resulting product is not insurance. You cannot insure against something that has already happened. It is merely a bill-paying mechanism. Likewise, the House bill prohibits insurance companies from charging premiums on any rational basis. Section 213, titled “Insurance Rating Rules,” provides:

The premium rate charged for a qualified health benefits plan that is health insurance coverage may not vary except as follows:
(1) LIMITED AGE VARIATION PERMITTED.–By age (within such age categories as the Commissioner shall specify) so long as the ratio of the highest such premium to the lowest such premium does not exceed the ratio of 2 to 1.

So young people–who, remember, will now be forced to buy health insurance–will subsidize older people.

(2) BY AREA.–By premium rating area (as permitted by State insurance regulators or, in the case of Exchange-participating health benefits plans, as specified by the Commissioner in consultation with such regulators).
(3) BY FAMILY ENROLLMENT.–By family enrollment (such as variations within categories and compositions of families) so long as the ratio of the premium for family enrollment (or enrollments) to the premium for individual enrollment is uniform, as specified under State law and consistent with rules of the Commissioner.

That’s it. A lower premium for non-smokers or the non-obese? Forget about it. It’s illegal.
Under the House bill, it is scarcely an exaggeration to say that health insurance companies are no longer in the insurance business. They can’t rate and underwrite risks, which is the essence of insurance. That’s illegal. They can’t decide to whom they will issue policies; that’s illegal, too. They can’t offer novel or innovative coverages; their coverages are dictated by law. To a limited extent they can make decisions on paying claims, but under the watchful eye of government regulators. Meaningful competition among insurance companies will be, in effect, illegal. (In that context, it is a sick joke that the Pelosi bill also subjects health insurance companies to the antitrust laws, from which they had been exempted in consideration of their regulation by state, not federal, authorities.)
In the world that the House bill would create, the money we will pay to insurance companies won’t really be insurance premiums. Insurance premiums are contractual payments which the parties voluntarily agree upon and which are based on a mutual assessment of risk. Rather, the checks we write to insurance companies will be taxes–legally compelled, at rates set by the federal government that are designed to punish some and subsidize others.
Isn’t this socialized medicine in all but name? The only difference, perhaps, is that when things start to go badly, as they inevitably will–spiraling costs, long waits for treatment–Nancy Pelosi and her colleagues will have someone to blame: the insurance companies. Maybe old-fashioned socialized medicine would be better. Then, at least, the government would have to take responsibility for its folly.

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