In the real world, rational people know that companies will stop selling products if they are forced to lose money. In the political world, though, common sense doesn’t matter. Or at least it ranks far below other considerations, such as power, polling, fundraising, and spite. If you think I’m being too harsh, just look at what’s happened since Obamacare. As the Wall Street Journal notes, the “child-only” insurance market has been decimated by a new law that allows parents to wait until children get sick before buying insurance. Needless to say, that is an open invitation to lose money, and no business (other than crony capitalism entities such as Fannie Mae and Freddie Mac) exists to throw away shareholder funds. Obama, Pelosi, and Reid probably think this is a good development, however, since they can demagogue against “greedy” insurance companies and claim that government should fully take over the health care system.
This week, almost every big insurance company in America—including Aetna, Cigna, UnitedHealth Group, WellPoint, Humana, Coventry, some Blue Cross Blue Shield affiliates and others—stopped writing “child-only” policies in the individual market. This is a niche product that parents typically buy when their employer health plan doesn’t cover dependents. The exact plans vary company to company and state to state, and the insurers will still offer family policies and make good on the child-only policies that they’ve already sold. But most won’t be writing new ones. In other words, for-profit businesses are refusing to sell products that consumers want to buy. Exact data aren’t available, but the child-only market covers roughly a million kids a year. The reason is a regulation that President Obama mentions every time he talks about health care, as he did recently in Falls Church, Virginia: “Children who have pre-existing conditions are going to be covered.” Insurers are now required to cover everyone under 19 when their parents apply for coverage, regardless of health status. The problem with this kind of “guaranteed issue” is that it encourages people, in this case parents, to wait until their kids are sick before seeking coverage. This drives up premiums for the healthy, encouraging consumers in turn to drop coverage, and eventually it leads to what’s known as a “death spiral,” the industry term for an insurer with rapidly increasing costs as a result of population changes in its coverage pool. The child-only market is a particular death-spiral risk because it is so small and unstable, which explains why so many insurers left in a stroke. The collapse of the child-only market is a preview of what will happen when guaranteed issue and the rest of ObamaCare comes on line in 2014 for adults, except then insurers will have nowhere to flee. Exiting the market will mean going out of business.
[…] was enacted, I started writing about groups victimized by the law. But after highlighting how children, low-income workers, and retirees were disadvantaged by government-run healthcare, I soon […]
[…] was enacted, I started writing about groups victimized by the law. But after highlighting how children, low-income workers, and retirees were disadvantaged by government-run healthcare, I soon […]
[…] population that have been disadvantaged by Obamacare, including ones that deserve sympathy, such as children, low-income workers, and retirees, as well as those that don’t deserve much sympathy, such […]
[…] population that have been disadvantaged by Obamacare, including ones that deserve sympathy, such as children, low-income workers, and retirees, as well as those that don’t deserve much sympathy, such […]
[…] low-income workers are being hurt. Just like it’s not funny that young adults, retirees, and kids are being disadvantaged by Obamacare as well (on the other hand, it is somewhat amusing that […]
[…] enacted, I began to maintain a list of groups that were victimized by the law. But after listing kids, low-income workers, and retirees, I quickly realized this was a senseless exercise because […]
[…] enacted, I began to maintain a list of groups that were victimized by the law. But after listing kids, low-income workers, and retirees, I quickly realized this was a senseless exercise because […]
[…] enacted, I began to maintain a list of groups that were victimized by the law. But after listing kids, low-income workers, and retirees, I quickly realized this was a senseless exercise because […]
[…] just need some clever messaging so we understand why it’s okay that bad things are happening to children, retirees, and low-income […]
[…] just need some clever messaging so we understand why it’s okay that bad things are happening to children, retirees, and low-income […]
[…] the victims are many relatively powerless people, including children, low-income workers, and […]
[…] the victims are many relatively powerless people, including children, low-income workers, and […]
[…] written how it victimizes children, low-income workers, and […]
[…] just need some clever messaging so we understand why it’s okay that bad things are happening to children, retirees, and low-income […]
[…] need some clever messaging so we understand why it’s okay that bad things are happening to children, retirees, and low-income […]
[…] 6, 2010 by Dan Mitchell We’ve already identified kids and low-income workers as groups that are being hurt by the new scheme for government-run […]
[…] 6, 2010 by Dan Mitchell We’ve already identified kids and low-income workers as groups that are being hurt by the new scheme for government-run […]
[…] 2, 2010 by Dan Mitchell This blog already has noted that Obamacare crippled the market for “kids only” health insurance policies. Unsurprisingly, that is just the beginning of the bad […]
[…] 2, 2010 by Dan Mitchell This blog already has noted that Obamacare crippled the market for “kids only” health insurance policies. Unsurprisingly, that is just the beginning of […]
Why won’t someone think of the children???
I think this quote from Frederic Bastiat is appropriate: “There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.”