Critical Condition

The Reid Bill: A Lose-Lose Proposition for Insurers

We’ve just posted a new analysis of the Reid bill by Richard Epstein, who concludes that it’s likely unconstitutional — and not only for its individual mandate. Epstein writes that

In effect, the onerous obligations under the Reid Bill would convert private health insurance companies into virtual public utilities. This action is not only a source of real anxiety but also a decision of constitutional proportions, for it systematically strips the regulated health-insurance issuers of their constitutional entitlement to earn a reasonable rate of return on the massive amounts of capital that they have already invested in building out their businesses.

Companies that participate in the state exchanges will be subject to extremely onerous federal regulations that will drive up their operating costs, and limit their ability to increase premiums to cover those costs. At the same time, it will be extraordinarily difficult for companies to sell insurance in the individual and small-group markets outside the exchanges, because consumers will not have the advantage of the lavish subsidies offered to purchasers within the exchanges. 

 

Voilá, the perfect bureaucratic guillotine.  

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