Monday, October 26, 2009

Forseeable Consequences

Part of the problem in the “health care” debate is that so many of the people debating, and offering solutions, know so little about the subject. Case in point is a comment made in response to an article in the Salt Lake City Tribune. The article was about the role of companies which self insure instead of buying health insurance for its employees, and the commenter responded,

The solution to the health care problems (and there are many), in my opinion, would be to relax restrictions that only allow a select number of companies to offer insurance in each state - open the industry up to competition.

The article is worth reading. Many people think their problem is with a health insurance company when it is actually with their own employer, and employers are fighting to keep themselves exempt from the changes in the pending reform.

At any rate, there are no restrictions of the nature that the commenter suggests; they would be an interference of interstate commerce, and would be unconstitutional. What states do is create a set of requirements that insurance companies must meet to do business in their state, and they do that for the purpose of consumer protection, not to restrict competition. Designing policies to meet those policies and becoming certified in a state is an expensive process, so only a few companies decide to do so.

States have done the same thing for auto insurance, and with precisely the same results; auto policies are less flexible and more expensive than need be. Oddly, I don’t hear any major outcry to force auto insurance companies to cease denial of claims, or to quit underpaying claims by using “fair market value” of damaged autos, or to issue insurance at the same costs regardless of prior record, or to remove caps on insurance. Nor do I see demands that we be allowed to “buy auto insurance across state lines.”

Limited availability is the result of something that people asked for. With their constituents clamoring to be protected against substandard and/or deceptive insurance policies, legislators passed legislation that protected consumers but which also reduced availability and made insurance more expensive; a perhaps unintended, but entirely foreseeable result.

I have no doubt that when regulations were first being proposed on car and health insurance there were realists who were saying that such regulation would result in higher prices and reduced availability. They were certainly impugned as being anti-progressive and accused of being on the side of the evil insurance companies.

Those people probably tried to say that they favored regulation but that, in imposing any regulation, we should consider all of the effects of that action and not merely the intended favorable effects, and be guided accordingly. And they were, of course, shouted down because they “were on the side of evil” and were merely trying to prevent the reform from being enacted.

We are proposing regulations now with the best of intention, and are not listening to anyone who suggests that there might be some negative consequences if those regulations are not crafted more carefully. Déjà vu
all over again.

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