Today’s milepost on the road to serfdom: The Obama administration is beginning to impose price controls on the insurance industry. Henceforth, if a health-insurance premium is to be increased by more than 10 percent, the company will be obliged to go and beg the government for its blessing.
Incidentally, Congress has enacted no law regarding that 10 percent standard. Health and Human Services secretary Kathleen Sebelius simply issued a decree. She could have chosen 1 percent, 11 percent, or 0.01 percent. Why 10 percent? Because it sounds nice and won’t confuse dim voters who are not good with math.
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In one important way, this move is even worse than it looks initially: The economics of price controls are well understood (usually the result is shortages), and the consumers the Obama administration alleges it is protecting here are the ones who will pay the highest price, in the form of degraded services and very probably, in some cases, loss of health insurance. That’s all obvious enough, and it serves the insurance industry right for allowing itself to be bought off with Obamacare’s individual mandate. But what the Obama administration really is up to is imposing undefined political mandates on insurance pricing. It hasn’t so much passed a regulation as inserted itself into the market as a subjective arbiter — a pattern it is following in other industries, too, and one that bears keeping a watchful eye on.
That 10 percent benchmark is a dead giveaway of politics at play: It’s an entirely arbitrary number that is in no way related to health-care prices, health-insurance prices, health-care inflation, general inflation, or any other economic factor. It’s a nice, round number that’s easy to remember — which is to say, it’s a political number, pulled out of Sebelius’s magic hat. Why is 10 percent the standard of unreasonability? The law contains a mess of self-referential, subjective standards: An “unreasonable” increase is one that is “excessive,” an “excessive” increase is one that is “unjustified,” etc. All of which means: Kathleen Sebelius gets to insert herself between insurers and the insured whenever she likes and do whatever she wants.
The Affordable Care Act empowers her to collar insurance providers and demand an explanation for an increase in premiums. The act does not empower her to block such increases. But many states already have that power, and so Sebelius & Co. will be using them — and $250 million appropriated to bribe them — to impose what Washington cannot: regulatory federalism in reverse. In those states that do not have the authority to enact price controls, Sebelius intends to step in and browbeat insurers herself: Which is to say, states with strong regulatory authority will find themselves used by Washington as tools, and states with weaker regulatory authority — states whose citizens have chosen not to enact strong regulations — will be supplanted by Washington.
All of this will proceed from an unwise and arguably unconstitutional delegation of power from Congress to the bureaucracy and the imposition of a meaningless, subjective standard of reasonability. Social order requires stable and objective rules. The federal minimum-wage law, for example, is a bad and destructive law, but it is easily understood, it establishes a clear standard not vulnerable to subjective political interpretation, the minimum can be raised only by an act of Congress or by the legislature in states with higher minimum wages of their own, etc. A minimum wage of $7.25 an hour means you have to pay employees at least $7.25 an hour. The regulation is clear and can be complied with in a way that is objectively measurable. Which is to say, the standard is the regulation, not the regulator.
The Obama administration and the Left in general have of late taken a different approach, investing power in regulators rather than in regulations. Price controls are bad enough, but a rule that says, “Insurance premiums cannot increase by more than 20 percent a year,” or, “Insurance premiums cannot increase by more than 150 percent of the Consumer Price Index,” or something similar is vastly preferable to a rule that says: “Ask Comrade Kathy.”
But “Ask Comrade Kathy” is what we’ve got. The Dodd-Frank financial-reform bill similarly creates a powerful regulator and a web of confused and subjective standards.
The lack of clear lines of authority, measurable standards, and stable rules does not make regulators weak: It makes them powerful. If the standard of “reasonability” is whatever Kathleen Sebelius decides it is on any given day, then it pays to be in the good graces of Kathleen Sebelius.
— Kevin D. Williamson is a deputy managing editor of National Review.
It is so nice that I am ever more safe and free by the day in the People's Republic of America. I could not be happier that our dear leader has chosen to be so benevolent to the common worker.
Healthcare shortages coming soon! Brought to you by your friendly Obama Politburo.
I guess the answer is to 'not get sick' ... although that ain't easy, considering that everything he/they do gives me a splitting headache. I better stock up on aspirin before it, too, gets price-controlled off the shelves.
So this is what Cass Sunstein meant when he wrote in his WSJ article, "A 21st-century regulatory system must promote economic growth, innovation and job creation while also protecting public health and welfare."
Too bad it looks eerily familiar to what the Soviets was mucking around with in the majority of the 20th century.
Oh, and if you wish to laugh, you can read the rest of his article:
This kind of action, taken by unelected and unaccountable officials appointed by the Obama administration, is what worries me most about his presidency. If he is defeated in 2012 (and I pray, for the good of our country, that he is), how will we dismantle the destructive infrastructure he is putting into place? It will take years to reclaim our lost freedom, if we ever truly can.
Republicans, we need someone with the intestinal fortitude to call Obama out on his dissembling about his radical agenda, and to offer positive alternatives to address our problems - debt, and entitlement programs that must be reformed. I have yet to see that candidate appear. No more of the "it's my turn" thinking - no business as usual, Republicans - our country truly is in danger of becoming a morally and fiscally bankrupt pseudo-eurosocialist entity if we do not defeat Obama.
I see it similar, with the only difference being is that it is the lowest double-digit number, so it is the optic number of choice...when you know they will have to raise prices to conform. They know it has to be above that.
With that information they say look, these are the bad guys with their high numbers. The whole system is arbitrary because the intended result is single-payer (BigBroHealth Inc.). So to achieve that they need populist support, hence the flexibility to reach that intermediate goal.
Leading from the back is like being a puppetmaster. Most people are entraced watching the dolls dance and are oblivious to the strings, not to mention the hands they're attached to. Enjoy the show, End of Act II in 15months.
Once Obama has used this regulation to drive all private insurance companies out of business, he will then go to congress and declare that since private companies have failed to provide insurance, it will now be up to govt to be the sole provider of health care.
When it comes to regulation of a complex industry such as health insurance, I want to be governed by the Harvard faculty, not by the first 2,000 names in the Boston phone book.
Health insurance doesn't work well in a free market. Just take a single regulatory requirement: reserves. Imagine health insurers not being required to maintain enough reserves to pay claims. There'd be an "AIG risk." How can the market correct for that? Would average Joes learn to shop for "responsible" insurers? And how does an average Joe keep track of year-by-year, quarter-by-quarter fluctuations in what his "responsible" insurer deems to be "prudent" reserves? And on and on.
And that's one single area of concern. What about what insurers cover and don't cover each time they renew? What about changing definitions? What about insurers baldly taking lawsuit risk? And on and on.
Some things really do need to be regulated. And for that task, I want smart people who feel a calling. Such people exist.
come now MikeB, have you never heard of A.M. Best?
The challenge for the pro big government folks is the massive, signal failure we've seen over the past few years. At the heart of three major issues in America lays the failure of the existing regulatory infrastructure.
The SEC didn't do a thing about Madoff. They didn't do a thing about the shenanigans that caused the meltdown.
Oh, no. Instead they were, as the IG stated, watching inappropriate movies on the government PCs
The same story appears with the BP disaster. An expensive and ineffective bureaucracy, the MMS completely failed us.
Given this sorry, sorry track record there is simply no reason to continue the belief that somehow the Harvard faculty can order our lives better than we can ourselves.
Mike B:
The federal government does such a terrible job running Medicare/Medicaid. Why would you trust congress or Obama's regulators to run the health system better private health insurance companies?
"Because I think the government does a pretty good job running Medicare and Medicaid."
I am willing to listen.
Please cite some facts and with comparisons to private business.
I am willing to consider any metrics you are willing to use:
Price, profit, overhead, fraudulent payment control, features of the product and marketplace flexibility, range of products (by price, features, availability and etc.), economic efficiency (use any metrics of measure you please.)
Oh, and one last metric: Long term stability and survivability.
The key to keeping the price low is to not cover anything under the category of primary care. The key word is "catastrophic." I don't think the feds allow for this type of plan.
Are you aware that Medicare denies more claims than all private insurers combined? External Link
And this is the gov't doing a pretty good job running Medicare and Medicaid?
And no one is saying insurance should be totally unregulated. What people ARE saying is that we want it to be run by accountable people vs unelected, unaccountable bureaucrats.
I guess the true measure of where the rubber meets the road is do you want UPS efficiency or Post Office efficiency? Do you want AMTRAK which can't make a profit and exists only due to taxpayer subsidies or or a modern airline whose service and performance is honed by market competition and lives or dies based on its own performance?
MikeB It seems to me that you have done very little research about the effectiveness of oversight of government run Medicare / Medicaid. From the onset, Medicare by law, must be the primary payer for all participants, regardless of whether they have other coverage and could pay some of the bill before relying on the government. Another reason that costs started soaring is that the government essentially gave providers a blank check and never provided oversight. Eventually, that mistake was "rectified" by creating DRG's which dictated how much would be paid based on the diagnosis rather than the length of stay or cost of treatment. Even with this, the government does an abysmal job of oversight. In fact, according to the GAO, in 2010 Medicare lost $48 BILLION (External Link) or more than FOUR TIMES what the top 10 insurance companies made in profit for 2010(External Link). Excuse me if I do not share your belief in government bureaucrats efficiency in seeing that the proper and needed care is paid for appropriately, much less provided by a competent practitioner!
What is being highlighted here is the natural result of ignoring the non-delegation doctrine. Technically the non-delegation doctrine- Congress can't delegate law making powers to the executive branch- is still good law. However, it has been eviscerated so much that Congress need only provide some general "intelligent principle" to the agencies when writing the laws. The courts almost always defer to an agency's plausible interpretation of such a law. Thus, a law that says "Ask Comrade Kathy" would lack any intelligent principle and would be invalidated. But a law which says Comrade Kathy can impose price controls whenever health insurance price rises are excessive would probably pass (although I don't think it should) because the term excessive gives the agency an intelligent principle to interpret the law. To non-lawyers both cases may seem equally arbitrary but that is simply not how the courts have looked at it. Until the Supreme Court starts to put more bite in this doctrine we will continue to have these very broad laws. Congress can take credit for the good eminating from the laws while blaming the unaccountable agencies for the bad rules or interpretations that inevitably follow
