Category Archives: regulation

Toward An Affordable Health Insurance Industry

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John Cochran, University of Chicago Booth School of Business Professor of Finance, among other positions, is on the right track, but he’s wide of the mark in some critical respects.

The unraveling of the Affordable Care Act presents a historic opportunity for change.  Its proponents call it “settled law,” but as Prohibition taught us, not even a constitutional amendment is settled law—if it is dysfunctional enough, and if Americans can see a clear alternative.

And

Only deregulation can unleash competition.  And only disruptive competition, where new businesses drive out old ones, will bring efficiency, lower costs, and innovation.

That’s plainly true, and he goes on to tout further—correctly IMNSHO—the advantages of a free market in the delivery of health insurance and the delivery of health care services.  However, he has some misconceptions in the extent to which those two industries should be allowed to go in a free market.

Health insurance should be…lifelong and guaranteed-renewable, meaning you have the right to continue with no unexpected increase in premiums if you get sick.

This isn’t insurance: it eliminates the concept of premiums being based on the risk being transferred.  Or, it is insurance, and the risk being transferred and the fee charged for accepting that transfer (the premium) will be elevated to account for the higher risk involved in that mandated longer-term risk acceptance as well as the changed risk factor represented by having gotten sick.  And sick again with the same thing.  And again.

Insurance should protect wealth against large, unforeseen, necessary expenses, rather than be a wildly inefficient payment plan for routine expenses.

This is blatantly normative and not at all related to the competition of free markets.  There will, indeed, be customers who want policies that cover “routine expenses;” it’s not Cochran’s—or government’s—place to proscribe these because they disagree that such policies have utility.

Rather than a mandate for employer-based groups, we should transition to fully individual-based health insurance.

Again, no.  This is another interference with a competitive free market.  It’s certainly true that the (tax-policy encouraged) “mandate” for employer-based groups is a distortion of the market.  However, rather than simply distorting the market in a different direction, let that market—the individuals who aggregate into that market—decide whether group plans are viable.

Aside from that, there is the matter of preexisting conditions.  The only risk that can be transferred here is the timing of the next flare up of the condition.  Forcing folks with these conditions onto the individual market will simply artificially elevate the premiums they’ll have to pay for the transfer of that risk.  Group plans would allow the risk acceptors, those insurance companies, to spread the timing across a risk pool larger than one, which would allow them to charge a lower premium—with a truly free, competitive market forcing them to compete for the business, and so exerting further downward pressure on the premiums charged.

Current group plans can convert to individual plans, at once or as people leave.  Since all members in a group convert, there is no adverse selection of sicker people.

This isn’t a free market—it’s a mandate to move away from a policy structure that many will want to retain, even if the coverages available within a particular group might change under free market imperative.  The free market also will handle the question of adverse selection just fine—that pricing matter.

Distressing to Whom?

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Scientists have zapped an electrical current to people’s brains to erase distressing memories, part of an ambitious quest to better treat ailments such as mental trauma, psychiatric disorders and drug addiction.

In an experiment, patients were first shown a troubling story, in words and pictures.  A week later they were reminded about it and given electroconvulsive therapy, formerly known as electroshock.  That completely wiped out their recall of the distressing narrative.

“It’s a pretty strong effect.  We observed it in every subject,” said Marijn Kroes, neuroscientist at Radboud University Nijmegen in the Netherlands and lead author of the study, published Sunday in the journal Nature Neuroscience.

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The hope is that one day it may be possible to selectively eliminate a person’s unwanted memories or associations linked to smoking, drug-taking or emotional trauma.

This is an extremely promising tool for helping folks overcome serious troubles.  Like many powerful tools, though, it can be very dangerous.

“Distressing memories.”  Distressing for whom?  The individual? Or Government?  Rudimentary efforts have already been tried: the Soviet Union’s Gulag.  It’s been warned of for a long time: Clockwork Orange.

Now that this sort of thing is coming to fruition, the tool wants, badly, close monitoring and control, and not only by our government.

Massive Overhauls

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Obamacare (and its microcosm, Cover Oregon) are textbook examples—case studies, even—of the utter failure of any attempt to execute a massive change of anything in one fell swoop.  The attempt is born of good intentions heavily informed with arrogance, with a good measure of impatience added: we don’t need to see how things are going, our plan is sound because our hearts are pure.

No.  Every change needs interim evaluation steps with which to determine whether the golden plan is, in fact, still on track and if not what changes are necessary—even to the point of changing course or canceling the program rather than mindlessly tweaking the present stage due to glitches.  The ubiquitousness of unintended consequences alone dictates that.

And the program doesn’t have to be done right now.  It just has to be done (always assuming we’re agreed on the program, an agreement notably absent with Obamacare, but that lack is for another time).

Now President Barack Obamacare wants to do another massive, all in one step, change of another enormous system: our collection of immigration laws.

President Obama and his top Democrats on Capitol Hill appear to have reset their sights on the Republican-controlled House passing comprehensive immigration reform, instead of a step-by-step process.

The president on Friday appeared to urge the House to back the comprehensive, bipartisan immigration bill the Senate passed this summer….

What was that bit about repeating a thing and expecting different results?

Another Judge Gets It Right

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Federal Judge Timothy DeGiusti has issued a preliminary injunction against Obamacare’s contraceptive mandate, thereby preventing the Feds, for the time being, from requiring organizations in the Western District of Oklahoma to make available insurance policies that cover the morning-after pill and similar contraceptives, and contraceptives in general.

GuideStone Financial Resources, an entity of the Southern Baptist Convention that handles health benefits for the Convention, brought the suit on behalf of nearly 200 ministries that use GFR to provide benefits for their employees.

It’s important to note that this is a preliminary injunction, and it can be overruled at any time.  However, it is intended to last throughout the suit itself: GFR, et al., have the right, says the Judge, to pursue their case, and it’s necessary to protect them from the harm caused by enforcement until the matter is settled.  After all, GFR, et al., have an excellent chance of winning the suit.

And they should win.  No government has any business dictating the religious tenets of our citizenry, nor does any government have any legitimate authority with which to overrule those tenets—especially for the petty convenience of that government.

DeGiusti’s ruling can be read here.

Foolishly Lawless

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Are there other ways of being lawless that matter?  Of course there are, but that’s for a different post.  The foolishness of this example of the Obama administration’s lawlessness is the subject here.

HHS Secretary Kathleen Sebelius has announced (sotto voce, via a letter to selected Senators) the latest rewrite non-legislatively effected change to the Obamacare law.

She…would allow people who got cancellations and could not find affordable new coverage to qualify for a “hardship exemption” in order to avoid a penalty next year for not having insurance.

Further…those individuals will be able to purchase bare-bones plans [catastrophic coverage plans] that until now were available only for people under 30.

…expected it to impact fewer than 500,000 people.

Senator Marco Rubio (R, FL) remarked,

Holding a fire sale of cheap insurance is not a responsible fix for a broken program.  This is a slap in the face to the thousands of Americans who have already purchased expensive insurance through the ObamaCare exchanges.

There are more than 5 million Americans in this sinking canceled insurance plan boat, though, not a half million.  And what about those folks who have already re-signed into suboptimal (but more expensive to make up for it) Obamacare plans about whom Rubio worries?  The open enrollment period doesn’t end until next March: how many of those folks will cancel their shiny, new, more expensive Obamacare plans and pick, instead, the Sebelius Plan—to the detriment of the Obamacare law cost structure?

Moreover, the “hardship exemption” under which Sebelius is offering her Plan says this about eligible hardships [emphasis added]:

…experienced financial or domestic circumstances, including an unexpected natural or human-caused event, such that he or she had a significant, unexpected increase in essential expenses that prevented him or her from obtaining coverage under a qualified health plan.

Is Sebelius really saying that Obamacare is a Man-Caused Disaster?

Finally, all this Individual Mandate…folderol…is coming after Obama and his Senate cronies shut down the government rather than delay the Individual Mandate.

Just how idiotic can one grown, adult President and one grown, adult Cabinet Secretary be in one lifetime?