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Playing Chicken In The Bay State

Somebody, pass the popcorn. The Great Massachusetts Insurance War is getting intense.

As both Kim and I have been noting, there's a drama going on in the Bay State that is providing a glimpse into the potential future of ObamaCare. A few years ago, the state decided that the health insurance biz needed some intense hands-on management that only the learned solons of elected office and their trusted hordes of bureaucrats can provide. First up, they decided that everyone had to have health insurance. Then, naturally, they had to start tightly regulating the insurance rates -- after all, a captive clientele that has to buy a product is ripe for exploitation.

Well, the insurance companies saw that this captive market was a mixed blessing. The model the state was proposing would guarantee them profits, in theory, but also meant that those profits would be limited -- and, if the state deemed it necessary, curtailed.

That theory went right out the window in short order. Last year, quite a few insurance companies ended up losing money doing business in Massachusetts last year. So they did what any company would do -- they adjusted their rates and policies to avoid more shortfalls.

Which ran afoul of the state, which didn't like the idea of having the rates go up -- especially if they had to sign off on those increases. After all, the people who'd be paying those higher rates are the same people who decide whether those politicians get to keep their jobs. So they said no to the insurance companies -- six out of seven of all the planned rate hikes went in the trash can. The insurers would just have to suck it up and keep losing money.

The insurers, not expecting such a rejection rate, had already posted the proposed new higher rates. So they yanked them down and put a hold on new policies while they sued the state, saying "you can't really expect us to keep losing money indefinitely, can you?"

Stupid companies. Of course they can. The politicians are caught between the insurers and the insured. The insured can vote them out of office; the best the insurers can do is fork over bribes campaign donations. And if they're already losing money, they probably have relatively little cash to fork over.

So the insurers have their big gun: they can walk away and simply stop playing the game.

It happened before. Years ago, when Massachusetts tightly regulated the auto insurance companies, the number of providers dropped year after year, and rates skyrocketed. It wasn't until the state cut back on the regulations that providers returned, and rates plummeted under the power of revived competition.

But when was the last time a politician -- especially a Massachusetts Democrat -- actually learned from history?

Remember, folks, the Massachusetts health insurance plan is one of the most important models for ObamaCare. What's happening there is a glimpse into what we all have to face in the very near future (the Massachusetts plan is only a couple of years old, and already falling apart).

Keep on keeping on, folks. We all know that chicken was just asking for it, dressing so scantily and acting so provocatively...

Hey, who knows? Maybe the chicken even likes it...


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Comments (17)

Obamacare is simply step on... (Below threshold)
Bob:

Obamacare is simply step one on the road to a single-payer system. He knows it and everyone else will figure it out sooner or later. There is no way private insurers can survive in such a system controlled by politicians and bureaucrats.

Bob is absolutely correct. ... (Below threshold)
Wright:

Bob is absolutely correct. As far as the Obamabots are concerned, driving insurance companies out of business is a good thing, a worthy goal. Once they're out of the way, they can get on with the real agenda.

Why not lay the blame where... (Below threshold)
Don L:

Why not lay the blame where it belongs on Romneycare...er...RINOCare..?

The name (not the party) matters not - it is the inevitable result of voters conditioned to expect lying politicians to give them a free lunch. Like battered wives that keep returning to battering husbands, these addicted compulsive people believe that this time the liars aren't lying. The results are always the same - more battering. The problem is that we voters who stay away from that silliness get battered too.

And the law of unintended c... (Below threshold)
JLawson:

And the law of unintended consequences rears its ugly head.

"But it sounded so good on paper! How could it go so wrong in reality?!"

Maybe because reality always trumps theory when it comes to legislative side effects?

What we're seeing is the societial equivalent of amateur programmers trying to fix a buggy program by slapping in untested patches - the more patches you toss in, the more side effects you have and the more chances you've got of subroutines interacting badly.

NASA's been criticized (somewhat unjustly, I think) for having a software change process for the Shuttles that is almost obsessively paranoid. They've got 4 main computers, always checking each other, so any proposed patches go through exceedingly rigorous testing. They CANNOT afford to have an unintended consequence in their software, so they test everything they can.

We have layers upon layers of lawyers writing laws and legislation with no thought about how such items will interact with what's already out there. And they have no way to actually test them - which is why Pelosi's statement of 'we have to pass the bill to find out what's in it' hit so close to the mark. We have to pass the laws, to find out how they're going to mesh with what's out there already.

And when the gears clash, the sparks fly and things get interesting.

Oh, one final point.<... (Below threshold)
JLawson:

Oh, one final point.

When a legislator gets into office, the one thing he can't do is NOTHING. He HAS to, as the saying goes, "publish or perish", to provide pork or be booted out at the next set of elections.

The Chicken metaphor brings... (Below threshold)
epador:

The Chicken metaphor brings to mind the icons of teendom from the 50's who were, in a movie, running cars off a cliff to see who would jump out first. The loser got his sleeve caught in the door lever and won the contest by going over the edge with his vehicle.

There is a wrinkle which mu... (Below threshold)

There is a wrinkle which muddies things up: the insurance companies aren't losing money in Massachusetts in total, they're losing money on certain groups, and they're not going to leave the state unless/until they are losing money overall. By rejecting the hikes, Patrick stuck it not so much to the insurance companies, but rather to the policyholders of the other pools who will pay higher rates than they normally would in order to subsidize the losses incurred by the insurance companies on the losing groups.

You're being way to ... (Below threshold)
Hank:


You're being way to harsh on Ma.

As proof, look at the wonderful job they did managing the Big Dig.

It's really too bad that mo... (Below threshold)
Upset Old Guy:

It's really too bad that more of our friends from the left side of the aisle don't understand the business of health insurance.

Health insurance is a losing affair for the insurer. Companies face the reality that they will be paying out from day one. They can't sell their policies at rates that allow them to collect enough to cover their pay-outs.

The reason insurance companies show a small percent of profit is that they get to have the use of a lot of people's money over the course of the year. And they get to make investments with some of that money. Those investments and the profit that comes from them are the difference between health care insurance business today and the industry thirty or so years ago.

So what happens when the insurance companies are gone and our government is paying all the bills? Government's administrative costs are higher than in private industry and government only has the money it takes from us. All the money governments says it's "investing" is just money being spent on things. Just like the idea of a Social Security lockbox, there ain't no such thing as our government making profit making investments.

JLawson-Precisely. For the ... (Below threshold)
Razorgirl:

JLawson-Precisely. For the life of me I cannot understand what people are thinking. Would you let a podiatrist defend you on an armed robbery charge? So why would you let a lawyer decide on your healthcare?

Lawyers are such an arrogant breed. I have one criteria when I go to vote in a primary...I cast my ballot for the candidate who is not a lawyer.

Sometimes "Don't just stand there, do something" should be "Don't just do something, stand there."

I've been watching this als... (Below threshold)
drjohn:

I've been watching this also, JT. It is a time machine looking glass that peers into the future of Obamacare.

It's a shame there aren't any Republicans intelligent enough to point this out.

I told you that Obamacare i... (Below threshold)
drjohn:

I told you that Obamacare is designed to result in the failure of the private health care insurance industry.

Sit back and watch in happen in Massaschusetts. Then watch it happen nationwide.

One thing you can bet the house on is "don't trust Obama."

And what does Romney have t... (Below threshold)
davidt:

And what does Romney have to say about all this?

I don't suppose that the st... (Below threshold)

I don't suppose that the state of Massachusetts is also participating in the industry by offering a public insurance plan? It's one thing when the government drives an industry into the ground; it's quite another when the government eliminates its competitors in an industry, after requiring people to buy its product.

I quite expect the federal government to put private insurers out of business with minimal effort. Price controls, special taxes on non-government-owned industry participants, special taxes for not buying the public option health plan...

The natural process is to h... (Below threshold)
Wayne:

The natural process is to have government take over as the insurance company. They will have ration care, quality of care will go into the dumpster, high taxes, aspirin will cost $50. All while politicians' line the pockets of family and friends.

TOTO, THIS AIN'T KANSAS.</p... (Below threshold)
poptoy:

TOTO, THIS AIN'T KANSAS.

dr john, the republicans ha... (Below threshold)
southernsue:

dr john, the republicans have been screaming about this horrible healthcare bill. none of them voted for this bill. you must be a democrat trying to sow seads of sedition or your head must be in the sand.




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