PrintJanuary 10, 2010
The End of Insurance
Barack Obama's health care plan ensures spiraling costs and will convert health insurance companies into cost-plus health reimbursement utilities, or else bankrupt them completely. Health insurance as we know it (think home/auto/life) will no longer exist. The president's plan also provides for taxpayer-funded abortion, making abortion even cheaper and increasing its frequency.
Insurance is
a form of risk management primarily used to hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium, and can be thought of as a guaranteed and known small loss to prevent a large, possibly devastating loss. ...There are two elements that must be at least estimable, if not formally calculable: the probability of loss, and the attendant cost. ...The essential risk is often aggregation. If the same event can cause losses to numerous policyholders ... the ability of that insurer to issue policies becomes constrained.
A key insurance concept is the need for a large, diversified pool of policyholders so that the insurance company can predict the pool's catastrophic events, and so that such events will be rare. Any concentration of risk in the insurance pool will increase premiums, given the negative impact of those excess payouts on the insurance company's bottom line. Obama and Reid have produced a bill that turns this insurance concept on its head by i) preventing underwriting based on medical risk and ii) requiring citizens (and employers) to purchase insurance or pay a fee. This combination guarantees an adverse selection problem whereby healthy people will pay the cheaper fee until sick and in need of insurance, whereupon they will enroll for non-deniable insurance. Risk pools will become sick pools, and insurance will become a pass-through vehicle for the cost of sick policyholders. The benefit of healthy participants, formerly shared by all policyholders, will be eliminated.
Risk-sharing is another key insurance concept. The policyholder and the insurer share risks and costs, but in exchange, the policyholder is mostly or fully protected against catastrophic economic loss (a home burning down, death, or expensive illness). When the policyholder retains non-catastrophic but more frequent expenses, the cost of the insurance (the premium) is reduced because the insurance company need charge less to make the same shareholder return. Obama and Reid have produced a bill that must raise policyholder premiums because it increases insurance company expenses by i) taxing drugs, devices, and policies; ii) eliminating "unreasonable" annual or lifetime limits on insurance company payouts; and iii) establishing maximum out-of-pocket limits for policyholders.
Because every liberal Democratic policy must be rooted in class envy, Barack Obama has vilified the health insurance companies. His lynch-mob sentiment is again defied by facts -- these insurance "robber barons" are not very profitable, nestled somewhere between the 35th- and 86th-most profitable U.S. industries, with a 2-3% return on sales.
Nonetheless, Obama and Reid reassure us that profits will be regulated through state exchanges, cost incurrence mandated, and minimum policy standards established. In other words, health insurance pricing, profits, and products will be governmentally determined. That's a regulated public utility, a framework typically used to address monopolistic situations (not the case with health insurers and potentially unconstitutional).
There is little difference between numerous companies whose pricing, profits, and products are determined by the government and one government-run company. In this light, the objections of Howard Dean regarding the lack of a "public option" seem to be disingenuous charades. He protests too loudly.
Public utilities have historically raised prices through "rate cases," wherein the utility presents evidence that operating costs have risen, resulting in unacceptably low shareholder returns and thus the need for higher rates. Historically, gas and power utility company rate cases targeted 10-12% shareholder returns. This is interesting, given that insurance company shareholder returns currently average 11%. This bill's expensive adverse-selection problems and cost increases must result in an escalation of premiums if insurance companies are to remain in business and earn utility-type returns.
Obama's and Reid's plan not only increases costs as described above, but also by requiring coverage of numerous non-catastrophic ($25-$400) items -- abortion, prescription drugs, lab services, wellness and preventative services, oral care, and vision care. For all these reasons, the bill will dramatically increase insurance company costs with one of only two possible conclusions -- premiums will increase commensurate with costs through the utility model (government-controlled health care), or government-imposed price controls will drive private sector players out of business (government-owned health care).
The Senate bill also funds abortion. If you are confused on that point, that's a desired effect of its complexity. Nothing about states opting in/out or policyholders paying a separate $12 premium for a $400 procedure changes this. The reason Obama favors the Senate over the House version (that directly prohibits federal funding of abortion) is obvious, given his pro-abortion record.
A baby's heart begins beating about 20 days, hiccups begin 52 days, and organs function eight weeks after conception. In a nauseatingly ironic nod to this the season of Herod the Great's slaughter of the holy innocents in Bethlehem, Obama the Great pushed for the inclusion of federally funded abortions. This is true despite his recent statement that "under our plan, no federal dollars will be used to fund abortions." This tax-funded subsidy will dramatically increase the number of annual victims from 1.2 million babies currently, accelerating the climb to 50 million victims since Roe v. Wade (eight times the Holocaust).
Minority babies have been disproportionately affected because most abortion facilities target lower-income mothers unaware of pro-life choices and the availability of prenatal care. (Eighty percent of Planned Parenthood locations are in minority neighborhoods.) Since Roe v. Wade, it is estimated that one-third of the black population has been eliminated, killing 13 million black babies totaling 40+% of all abortions despite the fact that only 12% of all U.S. women are black. How's that for disparate impact and racial profiling? President Obama's promotion of (the choice of) eliminating babies and black genocide is established, ambitious, and growing. Is this "post-racism"? If so, post-racists kill black babies with the same vigor that post-feminists savage female governors. Abortion is their shared passion.
In their mono-dimensional, not-Bush perma-campaign, the Democrats have slipped into a mantra of "something is better than nothing/change is good." This deceit of false choices sets too low a bar. This logic has already proven seriously flawed and costly, as in Harry Reid's declaration of U.S. defeat in Iraq in 2007, the election of Barak Obama in 2008, the failure of the stimulus/multiplier effect in 2009, and health care in 2010.
Obama and friends have created a moral, social, and economic abomination that is a lie and a violation of their duty to the electorate and the unborn. The Senate bill eliminates insurance as we know it, guarantees escalating costs for many reasons, inserts the government into private health care, funds costs on the backs of the elderly, and sends us to work to pay for someone to abort their child (opposed 3:1 in recent surveys).
