Insurance Claim

Small businesses in the US are facing sharp rises in their health insurance premiums next year. On average premiums appear to be rising 15% in 2010. The NYT quotes “experts” as suggesting that the insurance industry is “raising premiums to get ahead of any legislative changes that might reduce their profits”. Unfortunately for this theory, it seems to overlook the fact that Medicare, the government insurer is also raising its premiums by the same margin. This would indicate that the problem is rising healthcare costs rather than “greedy” insurance companies.

But for truly moronic remarks, one only has to looks as far as the inimitable Nancy Pelosi:

“The House speaker, Nancy Pelosi of California, said the sharp rise in premiums for small businesses offered the latest evidence that Congress must act swiftly on health care legislation.

““This underlines the urgent need for health insurance reform, including a public option,” she said in an interview. “We need to have competition for the insurance companies to keep premiums down.””

I can’t help briefly pointing out the massive contrast between this silly, partisan woman and the calm, sensible and non-partisan demeanour of the New Zealand house speaker, Lockwood Smith. I feel sorry for the US.

Offering the sudden price rise as a reason for moving on Obama’s healthcare legislation, when she must know that Medicare is raising it’s prices by the same amount; this is disingenuous enough. But suggesting that one of the most competitive industries in the US (Healthcare insurance) needs competition from the state to keep prices down has to rank as one of the most moronic economic statements of all time. It’s kind of like suggesting that the government should go into the PC manufacturing business because Dell is still making a profit…

Wall Street have been moaning about the health insurance industry for years because their premium rises have usually been below the level of medical inflation (considerably higher than general inflation). Yet Pelosi thinks there is excessive profit making!

The entire reason why the Health insurance industry is horrified by the idea of the expansion of Medicare is that there is no large margin for them to compete with an insurance scheme that will inevitably be subsidized by the American tax payer (the poor thing!), regardless of how much assurance the government makes that the new legislation will be “self-funding”.

The real lesson of the sudden increase in insurance premiums is that cost-containment of health care is only marginally controlled by insurance companies and mostly controlled by the hospitals and the doctors. Obama’s health care package addresses only some of the uninsured in the US and do not address cost-containment in any meaningful way. Without such a debate (that must be had with the doctors, not the insurers), all Obama is doing is increasing the liability and exposure of the tax payer with only minimal benefit to the under- and non-insured. It is legislation doomed to failure.

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