What are the consequences of insuring customers with pre-existing conditions?

Walter Williams

Investors Business Daily

What would happen if Obama succeeds in passing a law to force insurance companies to accept customers with pre-existing conditions at the same price as everyone else who doesn’t have pre-existing conditions?

Read this IBD editorial by George Mason University economist Walter Williams. (my second favorite economist)

Excerpt:

Sen. John Rockefeller, D-W.Va., chairman of the Senate Finance Subcommittee on Health Care, and Rep. Joe Courtney, D-Conn., a member of the House Education and Labor Committee, have introduced the Pre-existing Condition Patient Protection Act, which would eliminate pre-existing condition exclusions in all insurance markets. That’s an Obama administration priority.

I wonder whether President Obama and his congressional supporters would go a step further and protect not just patients, but everyone against pre-existing condition exclusions by insurance companies. Let’s look at the benefits of such a law.

A person might save quite a bit of money on fire insurance. He could wait until his home is ablaze and then walk into Nationwide and say, “Sell me a fire insurance policy so I can have my house repaired.” The Nationwide salesman says, “That’s lunacy!” But the person replies, “Congress says you cannot deny me insurance because of a pre-existing condition.”

This mandate against insurance company discrimination would not only apply to home insurance, but auto insurance and life insurance as well. Instead of a wife wasting money on costly life insurance premiums, she could spend that money on jewelry, cosmetics and massages and then wait until her husband kicked the bucket to buy life insurance on him.

Insurance companies don’t stay in business and prosper by being stupid. If Congress were to enact a law eliminating pre-existing condition exclusions, what might be expected?

Yeah, that’s why Walter Williams is awesome. And you must read the rest to see how it would apply to medical insurance. Everything sounds good to those who do not ask the most important question in economics: “and then what happens?” And that question cannot be answered with “then I feel good about myself and people like me because I care about the poor”. That question needs to be asked for the forgotten man. The nameless man who is hog-tied into supplying the wealth that gets redistributed by demagogues desperately seeking adulation from the covetous masses.

The problem is that people don’t understand how insurance works. If you have to pay guaranteed claims from people with pre-existing conditions, then the premiums of all those people who don’t have pre-existing conditions will be increased to pay for those claims. Think. Beyond. Stage. One.

The Cato Institute

Consider this podcast from the libertarian Cato Institute, which explains a little more from the point of view of the medical insurance company.

The MP3 file is here.

Here a summary of what happens after stage one, to the forgotten man. Medical care costs money to produce. Forcing medical insurance companies to sell care for a pre-existing condition far below the actual cost of providing it will force insurers to drop coverage for those pre-existing conditions. (Or they may drop the doctors who treat those conditions from their network). That is worse for the people with pre-existing conditions. And this is how economic ignorance hurts the very people that the secular leftist do-gooders are trying to help.

Believe me when I tell you that this happens all the time with leftist economic policies. It’s the law of unintended consequences. They think they are helping their preferred victims, they feel better about themselves, but they actually hurt the very people they are trying to help. And by “help” I mean they steal someone else’s money/product/liberty and transfer it to their preferred victims in order to buy votes.

National Review

Now, take a look at this article that ECM sent me from National Review, which talks about Obama’s promise that you will be able to keep the medical coverage you have. Is Obama telling the truth? Can pigs really fly just by sheer belief and pixie dust?

Excerpt:

Obamacare would forbid insurers from basing rates on the individual health of their customers in any community. It also would force issuers to cover people who refuse to buy insurance until they get sick. These and Obamacare’s other complexities and contradictions would make insurance pricier, as would a $149.1 billion, 40 percent excise tax on high-value “Cadillac plans.” Thus, some employers would save money by paying fines after de-insuring employees. Workers who cherish their health plans then would find themselves dumped into the government-run Health Insurance Exchange.

“Some smaller employers would be inclined to terminate their existing coverage,” explained a December 10 memorandum by Medicare’s chief actuary, Richard S. Foster. He added: “The per-worker penalties assessed on non-participating employers are very low compared to prevailing health insurance costs. As a result, the penalties would not be a significant deterrent to dropping or foregoing coverage. We estimate such actions would collectively reduce the number of people with employer-sponsored health coverage by about 17 million.”

Even more ominously, Obamacare would require employers to provide federally approved coverage. Obama considers “meaningful” plans those at least as generous as the Federal Employees Health Benefits Program.

“Obama’s definition of ‘meaningful’ coverage could eliminate the health plans that now cover as many as half of the 159 million Americans with employer-sponsored insurance, plus more than half of the roughly 18 million Americans in the individual market,” says Cato Institute policy analyst Michael Cannon. “This could compel close to 90 million Americans to switch to more comprehensive health plans with higher premiums, whether they value the added coverage or not.”

It’s not just elective abortions that we’re going to be paying for whether we want them or not. In some countries with socialized health care you can pay for breast enlargements (UK), sex changes (Canada), in vitro fertilization (Canada), etc. And these elective surgeries take up money from the other vital services. Obama can make it such that every plan has to offer those coverages.

So, those who don’t use such elective services end up encouraging them, even if they have moral objections to those services. When the government subsidizes something, more people choose it. Won’t Planned Parenthood be pleased with all that new revenue? I’m sure they’ll think of something to do with all that money. Maybe a nice political donation?

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