Tuesday, October 06, 2009

The Problem Hidden Inside Healthcare Reform

By Bill Fisher
October 6, 2009
Copyright © 2009 by William L. Fisher. All rights reserved.

The debate over healthcare reform continues to shift from one point to the other, and the Obama Administration continues to identify new enemies of healthcare reform on a daily basis. Lately, Obama and his followers have identified the insurance industry as the bad guy dejour. In fact, if you are listening closely, you will notice that the proponents of Obamcare have changed the name of their plan from “healthcare reform” to “health insurance reform.” The subtlety of this change has flown over the heads of most of America. But we should be paying attention, because this change lays bare the plan to nationalize health care on a level never seen in the US.

All of the talk about insurance plans being required to provide first day coverage without any limits for pre-existing conditions strikes a positive chord in the minds of most people. That sounds like a good idea. Other suggestions have come out about what should be required to be covered by these insurance policies. Some have merit, some are really bad ideas.

One such idea is the health insurance exchange. The idea is that people who are having a problem buying affordable health care insurance will be able to go to the health care exchange program and buy affordable health care insurance there by choosing the plan that fits their need and their pocketbook. The only problem with this idea is that it all depends on attracting health insurance companies who will place their policies in the exchange. What incentive is offered to attract these products? None! So, even if such a system is created by Obamacare, how will it function if the basic premise for its existence fails to materialize? The answer is it will not function, and those benefits that were going to be offered through the exchange will now have to be included in the government option part of Obamacare. Once the exchange becomes part of the public option, the overwhelming tendency then will be to just simply blend the exchange and the public option into one product, which will be government run.

But what is not being discussed in this debate is the monumental change in the regulation of insurance in America that will be required to accomplish any of these changes. At the present time, insurance companies are regulated by the states. Every state has a Department of Insurance, State Board of Insurance, State Insurance Commission, or some other official agency of state government that oversees the regulation of insurance companies within each state. State legislatures create the rules by which insurance companies are permitted to do business in their state. Insurance companies are required to be registered business entities in each state. Everything about an insurance company’s business is regulated by the state in which it does business.

In order for Obamacare to accomplish its goal of nationalizing health care, it is absolutely essential that the authority for regulating insurance companies be transferred from the states to the national government. The size of such an undertaking is mind boggling. And it cannot be done swiftly. It will take time to dismantle the state infrastructures of government that have regulated insurance every since there was insurance. The federal government has never regulated insurance, and the federal government doesn't know how to regulate insurance. It will have to learn. How long will that take, and how many mistakes will our federal government make along the way while it is learning?

Someone may object and point to Social Security or Medicare. Neither of these are insurance. Social Security is a government run retirement system that relies on current taxpayers paying benefits to current retirees. No actuarial science is used. The same for Medicare. Premiums do not pay for the Medicare benefits, taxes pay for those benefits. So, just like Social Security, Medicare beneficiaries have their benefits paid for by current taxpayers. No actuarial science is involved.

If we are to have the kind of healthcare reform being discussed today, the federal government will have to become the largest insurance company in history. They’ve done a lousy job of handling Medicare and Social Security, so why would Americans want to hand over the job of running the insurance industry.


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