This week Democrats threw a six-month birthday party for ObamaCare—and the timing was only appropriate since it occurred at the same moment their reform annihilated a corner of the U.S. insurance market.So-called "smart" regulation of the insurance industry.
Democrats were celebrating the arrival of ObamaCare's first regulatory wave, which was designed to land weeks before the election. These include mandated benefits like "free" preventive care (i.e., the cost is built into the premiums). Democrats think these "consumer protections" poll well, even though they're already raising consumer rates across the country. But the most immediately destructive item turned out to be new rules governing private health coverage for children.
This week, almost every big insurance company in America—including Aetna, Cigna, UnitedHealth Group, WellPoint, Humana, Coventry, some Blue Cross Blue Shield affiliates and others—stopped writing "child-only" policies in the individual market. This is a niche product that parents typically buy when their employer health plan doesn't cover dependents. The exact plans vary company to company and state to state, and the insurers will still offer family policies and make good on the child-only policies that they've already sold. But most won't be writing new ones.
In other words, for-profit businesses are refusing to sell products that consumers want to buy. Exact data aren't available, but the child-only market covers roughly a million kids a year.
The reason is a regulation that President Obama mentions every time he talks about health care, as he did recently in Falls Church, Virginia: "Children who have pre-existing conditions are going to be covered." Insurers are now required to cover everyone under 19 when their parents apply for coverage, regardless of health status. The problem with this kind of "guaranteed issue" is that it encourages people, in this case parents, to wait until their kids are sick before seeking coverage.
This drives up premiums for the healthy, encouraging consumers in turn to drop coverage, and eventually it leads to what's known as a "death spiral," the industry term for an insurer with rapidly increasing costs as a result of population changes in its coverage pool. The child-only market is a particular death-spiral risk because it is so small and unstable, which explains why so many insurers left in a stroke.
Saturday, September 25, 2010
Could This Possibly Have Been Foreseen?
Yes, it could have been, and it was, but the Democrats don't care. They don't want private insurers anyway, and they just killed off part of the insurance business on their way to single payer.