Massachusetts Turns to Premium Price Controls to “Control” Health Care Costs

Although Massachusetts government can fine people up to $1,116 a year for each month in which they do not have health insurance, it has not as yet figured out how to force health insurers to sell their products at a loss.

The Department of Insurance’s latest rejection of proposed health insurance rate increases has, according to the Boston Globe, created a situation in which “most” health insurers have stopped offering new health insurance in the Massachusetts insurance exchange (which is run by the Massachusetts Connector Authority).

The market for individual and small group insurance outside the exchange was destroyed when Massachusetts passed legislation modeled after “reforms” promoted by the Robert Wood Johnson Foundation in the early 1990s. In the name of insurance “reform,” the state required that individual insurers provide coverage for all pre-existing conditions. It simultaneously imposed community rating price controls on premiums. The price controls raised the cost of insurance for young people. The pre-existing condition regulation raised the cost for everyone, as rational people tended to buy health insurance only when they expected to have medical bills that were higher than the premiums.

In a misguided effort to solve the problems that it had created, Massachusetts created more problems by requiring everyone to have health insurance (still the most expensive way to pay for medical care short of having it provided by government), increasing the bureaucratic burden on all health care segments, and creating the Connector Authority to design and market health insurance policies offered by private companies.

Since rate controls and coverage requirements are similar to those in the ObamaCare health law, the rapid deterioration of the Massachusetts health insurance reform into a shoving match between the state government and the few remaining private insurers does not bode well for the success of federal health reform.

Comments (5)

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  1. Joe S. says:

    It doesn’t look good for Obama Care.

  2. Larry C. says:

    As Massachusetts goes, so goes the whole country.

  3. Devon Herrick says:

    It’s amazing how politicians, advocates and bureaucrats honestly expect insurers to continue operating money-losing activities just because the politicians, advocates and bureaucrats would like them to.

  4. Bart Ingles says:

    It’s all part of the game plan. Push all the insurers out of the marketplace. Cite the lack of competition as a reason for introducing a government-run option, which can initially “compete” by operating at a loss. Finally, when all private competitors have exited, raise premiums for the government option enough to pay for costs and generate a surplus, which can then be used to replace dwindling tax revenue.

    It was inevitable. The only way to avoid it would have been to head it off with a viable, more conservative set of reforms. Instead the GOP seemed to settle on a sort of radical quasi-libertarian scheme that would have gutted employer-sponsored coverage without first establishing a stable alternative. It had no chance of attracting moderate Democrat support. It’s almost enough to make me think that both sides were in cahoots– advancing as the sole alternative a “pushover candidate” whose main purpose was to draw support away from any viable alternative to Obamacare. But I suppose that would be paranoid.

    At this point the best hope seems to be to learn enough to effectively game the system. I suppose it’s possible that if the GOP gains enough this year and in 2012, it will have an opportunity to fix provisions that go into effect in 2013 and beyond. But to do so they’re going to have to move quickly from “repeal and replace” to simply “replace” and have something plausible in mind.

  5. John Schaffran says:

    You want something plausible? How about TORT reform! I am sure knee jerk libs will say no way to that idea. What is wrong with all states competing for private sector business? It is done for life insurance, car insurance! True conservatism needs to come back and these bastards on the left. By the way there is no such thing as a moderate, pro life, progressive democrat. Just ask Bart Stupak. He sold his soul and the electorate, which by the way voted him in at 65% of the vote in the last election, told him to not even bother running again. Many democrats are just as pissed off as conservatives are. Come November Obama and his liberal activists are finished for good! They will never, ever have complete control of this country ever again. Good riddance and good riddance to the RINO’s like McCain, Graham, etc.