Critical Condition

Obamacare Prods Yet Another Insurer to Flee the Market

First, a dozen insurers said they would stop writing child-only policies. Now, according to the Wall Street Journal:

Principal Financial Quits Writing Health-Care Policies.

Financial services provider Principal Financial Group is exiting the health-insurance business in an early sign of expected industry consolidation as the impact of the health overhaul becomes clearer.

By forcing the exit of Principal Financial Group — which ran a profitable, $1.6 billion health insurance business — Obamacare has now left 840,000 Americans to find another source of coverage.

According to the New York Times, other insurers may soon follow:

More insurers are likely to follow Principal’s lead, especially as they try to meet the new rules that require plans to spend at least 80 cents of every dollar they collect in premiums on the welfare of their customers…

“It’s just going to drive the little guys out,” said Robert Laszewski, a health policy consultant in Alexandria, Va. Smaller players like Principal in states like Iowa, Missouri and elsewhere will not be able to compete because they do not have the resources and economies of scale of players like UnitedHealth, which is among the nation’s largest health insurers.

Mr. Laszewski is worried that the ensuing concentration is likely to lead to higher prices because large players will no longer face the competition from the smaller plans. “It’s just the UnitedHealthcare full employment act,” he said.

Let’s remember what President Obama told a joint session of Congress just one year ago:

So let me set the record straight here. My guiding principle is, and always has been, that consumers do better when there is choice and competition. That’s how the market works… And without competition, the price of insurance goes up and quality goes down. And it makes it easier for insurance companies to treat their customers badly — by cherry-picking the healthiest individuals and trying to drop the sickest, by overcharging small businesses who have no leverage, and by jacking up rates.

Everybody got that?

Michael F. Cannon — Mr. Cannon is director of health-policy studies at the Cato Institute and co-author of Healthy Competition: What’s Holding Back Health Care and How to Free It.

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