Wednesday, June 9, 2010

ObamaCare nails its first “villain”

Obama and Pelosi demonized the insurance industry as they steamrollered their path to ObamaCare. Through government mandates and the lack of tort reform, all health insurance companies are in jeopardy. Obama has succeeded in having the Government take over 1/6th of the American economy. What we are close to now is renaming our country to "The Socialist States of America".

Nancy Pelosi called insurance companies “villains” last year, and in that sense, ObamaCare scores its first success today. The Virginia firm nHealth announced that it will close its doors by the end of the year, thanks to the costs associated with insuring people under the mandates imposed by Congress.

Pelosi and the Democrats blamed the steep rise in health care costs on insurers like nHealth while drumming up support for ObamaCare. They repeatedly demonized the supposedly rich insurance companies in order to play class warfare with health care. They and the media mainly ignored the fact that health insurers have very thin profit margins, averaging somewhere between 2-6% depending on the year. They didn’t have much room to meet the new coverage mandates while keeping costs at an affordable price, and nHealth merely felt the pain first.

Instead, this exercise shows where the actual cost drivers are — in government mandates. The intervention of governments in demanding certain coverages distorts prices. The intervention of courts in casino-like malpractice actions creates both higher insurance costs and tremendous incentives for a great deal of unnecessary care — by the CBO’s estimate, over $11 billion a year in defensive medicine. Democrats were well aware of these costs, but chose not to make malpractice tort reform a part of the ObamaCare package, despite many calls from Republicans to include it.

And what kind of insurance plans did nHealth offer? The kind of high-deductible, HSA-driven plans that put patients in charge of routine care and leaves insurance to cover the crises instead. They saved money while offering better pricing signals to hold down overuse of provider networks. In other words, nHealth was part of the real solution to “steeply rising health care costs,” and ObamaCare drove them out of business.
That serves as an example of how badly this government intervention will work out in the long term — and as a harbinger of what will eventually happen with other insurers.
Read "ObamaCare nails its first “villain”" here.

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