"Obama’s proposal would give the Health and Human Services secretary, Kathleen Sebelius, new powers to review premium hikes by private insurance companies – and in some cases, block those deemed excessive. Anthem’s rate hikes of up to 39 percent in recent weeks have focused attention on the skyrocketing health insurance costs, the very costs Obama vowed to fight when he undertook comprehensive health care reform last year.
Obama’s plan would create a new board made up health insurance experts, which would determine annually what are reasonable premium hikes in various markets, and the HHS secretary also would work with state officials, the White House said."
So on top of trying to pass their healthcare bill through reconciliation in the Senate, now we get this too. It’s a really smart move in the sense that it makes the Dems look like they’re doing everything they can to “control costs” in this sector. It’s a perfect example of a politically savvy move which will obviously have negative economic effects.
Plus it’s just a lousy precedent to set. Looks too much like New Deal type price fixing boards. Can’t remember what the name of that program was off the top of my head, but I know they had stuff like this for many industries during the New Deal.
Government intervention today is more sophisticated then you think it is.
Such agency that reviews and “approves” premium rates may do nothing but rubber stamp every rate hike that is introduced. Although it will sometimes reject certain schemes and approve others on the basis of completely arbitrary and fallacious reasons . It will hamper competition and choice even further, but it will probably not cause shortages.
What the government gains by this is the increased perception that it is protecting the consumers. That it is “regulating” and controlling, and therefore without such bureaucratic (and costly) controls, prices would spiral upward and all but the rich would have insurance.
This is similar to the regulations on credit cards. They are hurting competition by coercive prohibition and restrictions, but they are letting the prices fluctuate freely on whatever is left.
When calling people names fails then use force. Yeah I think that Obama who is the “Greatest Human on Earth” could set all prices. Just like the Communists did in Russia, China, Eastern Europe, etc. The results were always so positive. There Communists never lacked for any medical supplies or care and their facilities were always among the best.
Yes, this is a political move that is based on the assumption that the people won’t be smart enough to ask “what am I not seeing here?” Because they see the government “monitoring” the rate hikes and that’s what they care about.
Yeah I see what you’re getting at. I’m just thinking in terms of supply/demand curves right now (trying to keep my brain in mainstream economics mode for my micro class).
What I was implying is that the net effect of the government’s actions will be to put a price ceiling on insurance products that is below the so-called market equilibrium effectively creating a shortage of supply.
If he gets his way his healthcare bill will destroy private insurance in any case. Such is the natural progression with statist interference and encroachment in the healthcare biz: all roads lead to government command and control.