American Elephants


The Health Care Drama in Massachusetts is Turning to Tragedy, or Farce. by The Elephant's Child
April 9, 2010, 11:58 am
Filed under: Economy, Health Care, Taxes | Tags: , ,

The health care drama in Massachusetts continues.  Governor Deval Patrick kicked off his re–election campaign by rejecting most of the premium increases that the state’s insurance companies had asked regulators to approve.   Mr. Patrick rejected the increases, and now claims that price controls are the correct response to “industry greed.”

In Massachusetts, all of the major insurance companies are nonprofits.  Three of the largest four posted operating losses in 2009.  In an emergency lawsuit in Boston superior court yesterday, they argued that the arbitrary rate cap would result in another $100 million in collective losses, and make it impossible to pay the expected cost of claims.  Even the solvency of some companies may be threatened. So, until the matter is settled, the insurers have just stopped selling new policies.

State officials have demanded that the insurers resume offering policies, under threat of fines or regulatory punishment.  Amazing!  The situation is so bad that the Governor has to threaten companies to make them sell their products at less than market cost.

The state’s Attorney General and his insurance regulators have concluded that the reason why Massachusetts insurance premiums are the highest in the nation is the underlying cost of health care, not greedy insurance companies that Mr. Patrick and Mr. Obama like to cite.

Central to Massachusetts health care are mandates requiring insurers to cover anyone who applies regardless of their state of health or pre-existing conditions, and to charge everyone the same rate.  Surprise! This allows people to wait until they’re about to face major medical bills to purchase insurance.  Between April 2008 and March 2009, about 40% of new enrollees at Harvard Pilgrim Health Plan stayed with it for fewer than five months and on average, ran up costs about 600% higher than the company would otherwise expect.  Blue Cross Blue Shield has had similar experience.

This kind of thing will soon be coming to your insurance market.  Democrats chose to regard all Republicans’ warnings about unworkable mandates, underestimated costs and ignored savings as simply more right-wing troublemaking.  Keep watching Massachusetts.  It will be instructive.

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