Obama threatens insurance solvency

NY Times:

At the heart of President Obama’s drive to rein in health costs is a proposal for federal review and regulation of health insurance premiums, with a new agency empowered to block excessive rate increases.

State officials are leery of the proposal, which raises a host of questions: How would Congress define “excessive”? How would the new federal power relate to state insurance regulation?

The proposal has great political appeal. But experts see a serious potential problem: Federal officials will focus on holding down premiums while state officials focus on the solvency of insurers, the ultimate consumer protection.

Economists say that holding down premiums does not necessarily hold down the cost of care, which reflects the prices charged by doctors and hospitals and the volume of services.

State officials worry that they would be left to police the solvency of health insurance companies while federal officials pressured insurers to reduce premiums, as Mr. Obama has done in recent days.

“You can’t separate the underlying solvency of companies from the rates they charge,” said Sean Dilweg, the insurance commissioner in Wisconsin. “The federal proposal would be a huge pre-emption of decisions that states have made over their history.”

Mary Beth Senkewicz, a deputy insurance commissioner in Florida, said, “If you divorce rate-setting from financial oversight, that’s a fundamental flaw.”

“Premiums must be reasonable in relation to the benefits,” Ms. Senkewicz said. “That becomes a fairly complex analysis.”

...

There is more.

One of the reasons for the anti trust exemption for insurance companies is that their rates must be approved and regulated by state agencies. If Obama imposes arbitrary price restrictions on premiums charged the companies will have to reduce coverage or go out of business.

Obama has shown a profound ignorance of the way insurance works and he is courting disaster if he imposes his scheme touted in his "insurance" reform legislation.