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Get Ready for Health Insurance Slumlords

ObamaCare would force insurers to behave as slumlords, much like rent control does.

by
Brian T. Schwartz

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March 21, 2010 - 12:00 am
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If you dislike your health insurer now, just wait until politicians impose price controls that make your insurer act like a slumlord. Expect worse customer service, skimpier plans, and more claim denials.

Price controls on rental properties encourage landlords to become slumlords. Forbidden from making a profit by renting at market rates, to make a living landlords must skimp on quality and service rather than please customers. The same will result from insurance price controls: lousy policies for people with preexisting conditions or for anyone who might get sick.

That is, everyone.

Insurance price controls are quite fashionable with politicians these days. Both houses of Congress passed health care bills mandating community rating, which requires insurers to charge the same premiums regardless of health status.

In President Obama’s February 22 proposal is a “Health Insurance Rate Authority.” “If a rate increase is unreasonable and unjustified,” says Obama’s proposal, “health insurers must lower premiums, provide rebates, or take other actions to make premiums affordable.”

Such price controls should be no surprise, as ObamaCare emulates the “Massachusetts model” for so-called “reform”: mandatory insurance, employer mandates, subsidies, and Medicaid expansion. Responding to skyrocketing premiums and treatment costs, Massachusetts Governor Deval Patrick wants to increase the state’s authority to ban premium increases.

In Colorado, House Bill 1008 would forbid insurers from charging women higher premiums than men, though women’s claims are more costly. Do the bill’s sponsors plan to prohibit life insurers from charging men more than women, despite men’s higher costs?

“Government efforts to regulate prices … have invariably failed,” states a Progressive Policy Institute report on health care price controls. Insurance price controls are no exception.

They encourage insurers to drive away those who need insurance most.

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