Romney’s claim that the Massachusetts plan didn’t include price controls may have been technically true at the time the law was passed. But he helped create an unsustainable system that has quickly and predictably led to price controls — with still more to come. Hence, Romney’s claim is disingenuous if not downright misleading.

Read the whole article: PJ Media » The Truth About RomneyCare.

Many states have what are called premium rate review laws that empowering government authorities to forbid insurers from increasing premiums if the reasons do not sound justified. This may sound good, but for those who care about liberty and the right to free exchange, this clearly violates insurers’ rights to sell products at a price they see fit.

For those who support rate review laws regardless of rights issues, they should consider whether such laws are effective.  John Graham of the Pacific Research Institute compared insurance premiums in the 20 states with premium review laws, and with the 19 states that have “file and use” laws the require only that companies file rate increases with the state’s insurance commissioner, who has no authority to reject them.  Graham finds that

There does not appear to be any connection between prior approval and a lower change in rates from 2006 to 2008, nor the absolute value of rates in 2008. The average increase over the period was 8 percent for both file & use states and states requiring prior approval.

Rate review laws are not only ineffective, but also damaging.  Like other types of price controls, they require firms to sell products for less than they otherwise would. Just as rent control of apartments encourages landlords to become slumlords, insurance price controls will likely do the same to health plans. For examples, insurers would reduce costs by cutting back on customer service.

As Sally Pipes has written:

Last year, Massachusetts officials tried to crack down on health insurance rates, rejecting 253 of 274 proposed rate hikes across the state. Chaos ensued. The small-group health insurance market, which served 800,000 of the state’s residents, briefly shut down. Later in the year, all four of the state’s biggest health insurers reported that they’d lost money as the price caps were implemented. Three explicitly attributed their losses to the state’s rate rejections.

Insurers can’t endure state-mandated losses forever. Eventually, they’ll have to shed jobs or exit the market entirely. Consumers would be left with fewer choices. …”

Pipes continues:

ObamaCare’s rate review regulations are premised on the notion that rising health insurance premiums are somehow caused by excess profits and wasteful spending. But insurer profits are actually quite small. The Congressional Research Service reports that in 2009, health insurers’ average profit margin was just 2.6%.

At Forbes.com, Robert Book elaborates on health insurers’ profits:

According to this report from the left-wing organization Health Care for America Now, the five largest for-profit health insurance companies “pocket huge profits” totaling $11.7 billion in 2010. The same report also says they had a total of 86.3 million enrolled members, which works out to a total of $136 in profit per member per year.

The Feds also have also extended their authority into rate review. As Book writes:

The Affordable Care Act does not define what it means for a premium increase to be unreasonable,” but the administration defined it in a regulation issued in May. An increase is defined as“unreasonable” if it is “more than 10%.” (76 FR 29964).

So, if a health insurer increases rates by more than 10%, that’s “unreasonable.” What if costs of the underlying health services they pay for increase by more than 10%? Still unreasonable. What if their patients got sicker, and required more than a 10% increase in services? Still unreasonable. What if they need the money because regulators made additions the list of preventive services – that must now be covered without copays? Still unreasonable. What if they need the money to pay their share of the new $8 billion tax on health insurers? Well of course that’s unreasonable. What if they use the rate increase to pay for golf tournaments for executives? Well, that’s not treated any differently – it’s reasonable if the increase is 9.8% and unreasonable if it’s 10.2%.

Empire Blue Cross Blue Shield, the largest health insurer in the region, announced to health insurance brokers … that it will eliminate most of its small group plans in the New York market effective April 1, 2012, and is slashing its financial incentives for brokers to sell those products—a move one industry insider has said would be “catastrophic” for the insurance marketplace.

…Officers of New York State Association of Health Underwriters sent a letter … addressed to the superintendent of the State Department of Financial Services, stating concerns that a major carrier, which it did not mention by name, is withdrawing from the small group market because of rate request denials/reductions in the last five consecutive quarters. Mr. Hasday later confirmed that the letter referred to Empire.

Read more at DirectorBlue: Obamacare-style price controls succeed in New York: ‘tens of thousands’ to lose their health care coverage.

(via FIRM)

In 2008 Colorado passed a law giving the Division of Insurance the power to deny premium hikes. To enhance this power, known as “prior approval,” Obamacare gave Colorado a $1 million grant last year to hire more insurance analysts to review rates.

There is no evidence, however, that such power reduces the growth of premiums below those observed in states where insurance divisions wield no such power. And the future wave of political interference threatens the solvency of health plans in Colorado and other states. …

In a new study, “Bust or Bailout? The Future of Private Health Plans Under Obamacare,” I model Colorado health plans’ future solvency under these conditions — where government control causes health costs to increase, while premiums are kept artificially low.

Although Colorado health plans are currently actuarially sound, the simulation shows that five of the top 10 health plans … would be threatened with insolvency by 2017. The Kaiser Foundation Health Plan of Colorado, largest in the state, would experience an underwriting loss as soon as 2013, and face insolvency as soon as 2015. …

The notion that politicians can control health costs is a conceit of the ruling class. Health costs will only decline when patients, not politicians, directly control more of our health spending. This cannot happen until President Obama’s health law is repealed. In the meantime, Colorado should reject politicized control of insurance premiums.

Read the whole article: Obamacare threatens solvency of Colorado health plans.

You might believe the ObamaCare offers the only way to cover people with pre-existing conditions — if you read only Colorado Public Television’s misleading “fact check” on Colorado Representatives and the contested health care bill. Actually, ObamaCare [HR 3590]makes things worse, not better, for people with pre-existing conditions. Our representatives should support better alternatives.

Read the rest of this article: How to Insure Americans with Pre-Existing Conditions.

Thanks to Paul Hsieh and Ari Armstrong for their suggested revisions.

Thanks to this clarifying list of descriptors, it’s all makes sense now: A rate hike is unreasonable if it’s excessive. It’s excessive if it’s “unreasonably high.” If you’re worried that this sounds circular, then let me suggest that you hop on the Gravitron, start spinning, and let me know when you can’t tell which way is up.

Read the whole post: Health Insurance Rate Hikes: Unreasonable if Excessive, Excessive if Unreasonable.

See also “Sebelius’s Price Controls” from the Wall Street Journal. From the op-ed:

Ms. Sebelius’s true goal is to punish the insurance industry for rising health costs that the new entitlement is already turbocharging. Like so much else in U.S. health care, no one seems to find it odd that the government is decreeing how much businesses are allowed to charge for a product that consumers want to buy, regardless of the economic reality. …

State regulators, [Connecticut Attorney General Richard Blumenthal] continued, are “in an unenviable position as we are required by Congress to approve richer benefit packages, while simultaneously being called upon by you to reduce rates.” …

Politicized rate-setting is the new reality of the U.S. health insurance market, not that consumers will in any way benefit.

The Denver Business Journal reports:

From the Friday September 17 Denver Business Journal:

Colorado Insurance Commissioner Marcy Morrison has called a meeting of the state’s individual-market health insurers for Friday to address the number of companies that are dropping child-only individual policies rather than conforming to increased federal mandates on those plans. …

“It’s strictly information-gathering, as far as I’m concerned — no hammers, no nails,” Morrison said.

But when asked whether the state could do anything to require insurers to offer such policies — a question that Jo Donlin, director of external affairs for the Colorado Division of Insurance, answered early this month with a “no” — Morrison instead offered no comment.

“That’s the $64,000 question,” she said. “I just know I want to hear from them. I have no comment now on whether the state can do anything.”

“No hammers, no nails”?! Gosh, sure sounds like she has them with her and is prepared to use them.

As I’ve noted in “Get Ready for Health Insurance Slumlords,” if insurers are forced to sell the policies, they will design them to make them unappealing to those with pre-existing conditions anyway.

At least five Colorado insurers will stop selling new individual health insurance policies for children by Oct. 1 because of soon-to-be-enacted federal mandates [from HR 3590 - BTS] requiring them to cover all applicants under age 19, including those with pre-existing medical conditions.

…this action by several major companies, including three of the top six providers of individual accident and health insurance in Colorado, portends what could be even more major changes coming from insurance companies because of the recently passed federal health care reform law. …

A few months ago I warned to Get Ready for Health Insurance Slumlords, as when insurers are forced to insure high-risk people at the same premiums as those with low risks, they respond by designing their products and services such that high-risk customers do not want them.  Or they can stop selling the product, as is the case here.

The DBJ article continues:

Most children receive health insurance as dependents on their parents’ plans or through publicly funded plans such as Medicaid. But parents who lack insurance themselves sometimes buy policies for their children. Those children are who could be affected most by this decision.

… Jim Turner, corporate spokesman for Louisville, Ky.-based Humana, said … . “In addition, the cost of administering child-only policies makes it exceedingly difficult to meet new standards [medical loss ratios - BTS] that require at least 80 percent of premium be spent on medical care.

Child-only policies typically have lower premiums, with no other family members to contribute additional premium that might help offset administrative costs.”

… Dede de Percin … predicted that the decision to stop writing kids-only policies could sully the reputation of the companies and cost them business.

“It doesn’t portray them in a very good light in terms of their commitment to families or community,” de Percin said. “It definitely assures gaming the system and trying to get around the regulations of the affordable care act, and it’s a shame that they’re taking it out on kids.”

This argument is despicable. She’s using “for the children” argument to push an agenda the forces businesses to act according to a politicians’ judgment, and not their own.  Insurers are not charities, and people do not buy insurance for the purpose of giving to charity.  Is really  “gaming the system” to stop selling products that lose money or make your products more expensive?

“The system” she refers to is the one politicians have imposed on us, which is responsible for expensive non-portable insurance in the first place.

See also David R. Henderson’s post at EconLog:  Unintended, but Totally Predictable, Consequences.

Yet given the state of Colorado politics and the political climate elsewher,e there’s very little “private” aspects left in the health insurance market.  State-level politicians require small-group and individual policies to include certain benefits (mandated benefits) and limit how much insurers can determine premiums based on risk, or lack of risk (insurance price controls, community rating).  State authorities also ban customers from buying more affordable and/or desirable policies legal in other states.  These controls reduce competition and increase premiums.