President Barack Obama promised he’d bring the cost of insurance premiums for families down by $2,500 by the end of his first term. If he wants to keep that promise, he’s got his work cut out for him this year. His latest plan certainly won’t do the job.
A recent survey conducted by the Kaiser Family Foundation found insurance premiums for family policies rose to more than $15,000 a year in 2011. That’s an increase of $1,300 over the past year for the average policy, the highest single-year premium hike since 2005, according to Kaiser.
What’s the administration planning to do about this? Well, given that insurance premiums have risen largely because of the mandates in Obama’s health care law – requirements to do all sorts of things that cost insurers more money – his administration recently declared … a public relations war.
Health and Human Services Secretary Kathleen Sebelius recently announced she’ll be highlighting rate hikes on a taxpayer-funded website, bringing the weapon of shame to bear on insurers who raise their prices too much for the administration’s liking.
Insurers that raise rates by 10 percent or more in any year will be forced to make a public case for their reasons for doing so, on the government Web site. Although some states have posted or released the results of rate reviews, Sebelius’ website will, she claims, weed out “unjustified” rate hikes which, in her words, go toward “advertising or big CEO salaries.”
Sebelius’s approach is much the same as in Massachusetts, where “emergency” regulations put in place by Democrat Gov. Deval Patrick sparked a court battle after his insurance department denied 235 of 274 increases proposed by insurers.
The obvious aim of the Obama administration’s project is to shame insurers who have to raise rates in order for their policies to make economic sense after filling all of Obama’s requirements, in order to keep from going out of business.
Imagine, if you will, that some product came onto the market that everyone wanted but was just too expensive. Say the iPhone 5 was priced $1,300 higher than the previous year’s edition. There would be a great deal of hue and cry. But after all, nobody has to buy one.
Not so under the Obama scheme. You have to buy one, so the administration will employ shame police who demand the folks at Apple publicly justify their outrageous pricing.
That is obviously unnecessary. If Apple decided to raise prices this way, lines outside the Apple stores would shrink dramatically as people surveyed the marketplace and found other, less expensive options. This is how marketplaces work – the people, not the government, decide what something is worth. The only reason health care is now the equivalent of a $1,600 iPhone is the government mandates that make it expensive. Remove the mandates, and the price will come down.
The Obama administration maintains it is better than you are at deciding what things are worth to you. This is par for the course for an administration that fundamentally fails to understand its policy decisions don’t apply to an imaginary world where government can control everything, but instead to a real world where people and firms respond to incentives and attacks, and not always in the way politicians might desire or expect.
When the administration issued vast new rules and regulations about who insurers have to cover and what services they have to provide, it apparently never realized those things would cost money, and a lot of it, which would have to be obtained from individuals in the form of higher premiums. Instead of revisiting whether these policies were all that necessary to begin with and worth the pain, all they propose to do now is blame the other guy.
By BENJAMIN DOMENECH / Managing editor of Health Care News and a research fellow at the Heartland Institute