Health Insurance Industry Sells Its Soul to the Devil
In German folklore, Johann Faust was a physician who sold his soul to the Devil in exchange for knowledge. Of course, the pact destroyed him. The American health insurance industry is on the verge of striking its own Faustian bargain with the U.S. government. But this bargain won't just destroy the insurance industry; it will also drag 300 million Americans into the pit of government-run "single payer" socialized medicine.
Sensing the changing political winds favoring "universal health care," the largest trade group for health insurers (American Health Insurance Plans) recently agreed to accept regulations requiring them to sell individual policies to all patients regardless of preexisting illnesses. In the past, they had opposed such requirements as too costly. However, they've now agreed to accept such regulations in exchange for a law requiring all Americans to purchase health insurance.
At first glance, this might look like a good deal for the insurance companies. They would receive a seemingly guaranteed market for their products (as if Congress had bailed out General Motors by requiring all Americans to purchase a new GM car every few years.) But this guaranteed market would come at a steep price. A "Federal Health Board" would impose onerous political controls on insurers, specifying which patients they must accept and which benefits they must offer. Insurers would be required to sell policies at prices the government deemed "affordable." Private insurers would also have to compete with taxpayer-subsidized government insurance plans. As health costs continued to rise, such an arrangement would become unsustainable. No business can survive long when the government forces it to sell $2,000 worth of services, but only allows it to charge $1,000.
When South Dakota and Kentucky passed similar laws, many insurers left these states rather than operate at a loss. Similar laws at the national level would likely drive many insurers out of business altogether.
The inevitable collapse of the private insurance market would then leave millions of Americans without insurance coverage. Although this collapse would be caused by government regulations, pundits would undoubtedly portray this as a "failure of the free market." Politicians would demand that the government "rescue" health care from "greedy capitalists." The end result would be a "single payer" socialized medical system like Canada or Great Britain's.
However, a "single payer" system would lead to misery and death for many Americans. Such systems control health costs through rationing. Canadian breast cancer patients often wait months until the government approves their surgery and chemotherapy. Canadian cardiac patients often die while waiting for surgery, unless they can use political clout to "jump the queue" ahead of others (or travel to the U.S. for care.) Great Britain's National Health Service has paid bonuses to primary care physicians who have reduced their referrals to hospital specialists, forcing doctors to choose between their patients or their government paychecks. Do Americans really want a system in which their doctors can't or won't work for their best interests?
Health insurance companies should neither seek nor accept a Faustian bargain that will ultimately destroy them. Instead, they should support free-market reforms that correct the problems caused by existing government controls. One example would be repealing "community rating" laws that force insurers to charge the same prices for all patients in a community regardless of their individual medical histories. Another would be repealing "mandated benefit" laws that force insurers to offer (and patients to purchase) unwanted benefits such as in vitro fertilization coverage. A third would be repealing laws that forbid patients from purchasing health insurance across state lines. Such reforms could reduce insurance costs over 50%, making health insurance available to millions who cannot currently afford it.
Whether health insurance companies realize it or not, they are on the verge of selling themselves to the Devil -- and taking the rest of us down with them. Whether we let them is up to us.