In anticipation of the healthcare summit details of the plan that the president will propose are beginning to come out:
WASHINGTON — President Obama will propose on Monday giving the federal government new power to block excessive rate increases by health insurance companies, as he rolls out comprehensive legislation to revamp the nation’s health care system, White House officials said Sunday.
The president’s legislation aims to bridge differences between the bills adopted by the House and Senate late last year, and to frame his debate with Republicans over health policy at a televised meeting on Thursday.
By focusing on the effort to tighten regulation of insurance costs, a new element not included in either the House or Senate bills, Mr. Obama is seizing on outrage over recent premium increases of up to 39 percent announced by Anthem Blue Cross of California and moving to portray the Democrats’ health overhaul as a way to protect Americans from profiteering insurers.
I have little doubt that the move will be popular. I’m not as confident that it would be effective even if it were to be enacted into law. If the rates are set above the market clearing price, it’s yet another case of private profits and public costs. If the rates are set below the market clearing price, it will create shortages. How confident are you in the ability of the central planners to set rates correctly?
And that it will be enacted into law isn’t a done deal. Clearly, this would be a new bill, would need to be passed by both houses of Congress, and it would effectively required 60 votes in the Senate to pass. Will Congressional Republicans find this approach appealing? It’s hard for me to imagine that they will.
Even Republicans more moderate than those in Congress are troubled by the approach. For example, James Joyner see it is bizarre:
This would, in effect, turn private health insurance companies into public utilities. And, while that makes some sense in the case of monopoly providers for vital services where efficiencies won’t allow multiple competitors — multiple power grids and the like are not feasible — it’s truly a bizarre idea in a field, such as health insurance, where dozens of providers exist and the barriers to entry for other competitors are relatively low.
It’s not unprecedented. After all, half of the states already regulate healthcare insurance premium rates to some degree. And healthcare insurance premium rates are regulated strictly in OECD countries other than the United States.
I think it also bears mentioning that the president’s actions fully vindicate the view of those who predicted that, after letting the Democrats and Republicans in the House and Senate duke it out over their versions of healthcare reform, President Obama would swoop in with a plan of his own. IIRC that’s a component of the community organizer theory of the Obama presidency.
It remains to be seen whether the strategem will prove effective.
I also don’t think it can be said often enough: healthcare insurance premiums rise as healthcare costs rise. If you want insurance premiums control the rate of change of healthcare insurance premiums, you must control the rate of change of healthcare costs.
That healthcare premiums are rising faster than healthcare costs as in California is not a contradiction of that simple fact of insurance. It stands to reason that premium increases are front-loaded, i.e. that, if insurers anticipate future increases in healthcare costs, they will increase premiums now. Rather the move is a vote of no confidence in the bills that are currently under consideration do much about restraining increasing healthcare costs.