Tuesday, October 13, 2009

Insanity Increases

The America's Health Insurance Plans released a report saying that the cost of health insurance will increase under legislation presently being proposed as “health care reform.” Democrats are outraged and cannot understand why the industry is attacking them at this stage of the game after being quiet so long.

Marc Ambinder refutes the report by saying that it overlooks subsidies.

Without those subsidies, mostly in the forms of tax credits, insurance premiums would rise for most everyone. With them, they're going to rise for some folks -- this is where Republicans get their "tax increase on the Middle Class" trope -- but no one assumes that the final bill won't provide any subsidies whatsoever. In fact, that assumption is fairly ridiculous on its face.

Which doesn’t say the premiums won’t increase, of course, and actually acknowledges the factuality of the report. It also doesn’t point out that people above a certain income range won’t be eligible for those subsidies.

The second assumption is ideologically defensible, to a point. The report assumes that, faced with higher fees on certain services and products and new tax on expensive individual plans, the insurance industry will raise prices to compensate themselves for lost revenue.

Of course insurance companies will pass additional costs on in the form of increased premiums. Why in the world would they not do that? That is not only business 101, it is high school level. When the cost of a product increases the selling price of that product increases. There is no business school anywhere in the world that suggests that when the cost of a product increases you begin selling it at a loss.

Democrats, the White House and most health economists believe that the insurance industry has larger incentives to reduce the costs of these plans (by reducing benefits) -- rather than increasing their price.

So reduced benefits are not a problem, so long as premiums don’t increase? Notwithstanding that reform legislation is aimed at increasing, not reducing benefits? We are going to legislate for elimination of caps along with lower deductibles and copays, and the insurance companies are going to offset the increased cost of that with reduced benefits rather than by increasing premiums.

Pay the extra cost of increased benefits by reducing benefits.

Each time I think this debate has gotten about as insane as it can get, someone comes along and proves that insanity has not yet reached its peak.

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