Arnold Kling  

Now I Believe the Insurance Industry Study

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The Washington Post reports,


An internal industry study released earlier this week found that the Senate reform bill would cause premiums to rise sharply, but the report's findings have been widely disputed...

Pelosi said the House may adopt a Senate provision that would assess a flat fee on insurance companies that is expected to generate about $40 billion over 10 years

Thanks to Tyler Cowen for the pointer. I held off on commenting on the insurance industry study when it was released, because I wanted to give the study's opponents time to assemble a reply. The reply has been mostly ad hominem.

If the Democrats had solid evidence that their reform bill will not substantially raise insurance rates, then they would just give us that proof and dispose of the issue that way. Instead, punishing the insurance companies for releasing the study suggests to me that the study has some validity to it.

At a state level, one does find higher insurance rates in states that are regulated along the lines proposed in the bill. I don't know whether the amounts suggested in the insurance industry study are reasonable. But the direction is almost surely correct.

I am not a fan of the health insurance industry. But I am even less of a fan of enacting taxes solely for the purpose of punishing one's political opponents. Morally, it is on the same level as throwing your enemies in jail.


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The author at Health Care BS in a related article titled The Accuracy of the PWC Study writes:
    Arnold Kling advises that, his general aversion to the health insurance industry notwithstanding, he believes what the recent PWC ┬ástudy says about the Baucus “reform” bill: I held off on commenting on the insurance industry study when it ... [Tracked on October 16, 2009 10:48 PM]
COMMENTS (6 to date)
Eric H writes:

Punitive taxation on the insurance industry...it's like rent-seeking in reverse. Ugh.

Babinich writes:

"If the Democrats had solid evidence that their reform bill will not substantially raise insurance rates, then they would just give us that proof and dispose of the issue that way. Instead, punishing the insurance companies for releasing the study suggests to me that the study has some validity to it."

I am waiting for the anti-democrats to unleash the dogs of war on this issue.

I believe the anti-dems will; they're bidding their time waiting until the time is just right.

Jim Glass writes:

Both the AHIP study on the Baucus plan and the Dems' response to it were examined by Keith Hennessey in a post well worth reading in full.

The gist...

1) The insurers aren't trying to block the Baucus plan, but only certain parts of it they don't like. E.g., the study didn't mention cost-raising parts of the plan the insurers do like (which they surely would have mentioned if really trying to kill the plan). They are trying to reshape the plan more to their interests.

2) The Baucus/White House responses effectively admitted that the plan will increase costs in a big way, by being based on emphasizing all the subsidies the Baucus plan will provide.

Well, if you aren't increasing costs you don't need to dish out big subsidies to keep people from paying rising costs -- and the subsidies themselves are a big extra cost.

I.e., what the Dems are describing as "cost reducers" are really "cost shifters", a very different thing.

R. Richard Schweitzer writes:

WHY is it so hard to understand that insurers (commercial, co-op or public) which exist to spread risks are being perverted by making them the vehicles for spreading costs (not risks); know better as cost shifting.

Now the efforts are to shift the costs of what would be paid for by direct taxation onto insurers and other providers and admin services.

We do not hear it yet, but what is today called "insurance coverage" should be broken up into at least two segments: One - the pure risk component (e.g., catastropic cover) Two - healthcare (maintenance) cover; separate policies, just as life insurance is not combined with health insurance.

Separate premiums, separate benefits, not to be combined.

R. Richard Schweitzer writes:

It has been a bit surprising that the AHIP wizards did not grasp from the beginning that the legislation to "Force" additional persons into the private insurance "risk" (actually cost sharing) pools, with or without change in "penalties," is just as likely to fail as lacking constitutional authority; and as a violation of limitations on the express powers of taxation set forth in the Constitution; uniform excise, per capita, by enumeration or income.

Plainly, a requirement for compulsory purchase of healthcare coverage enforced by taxation would not stand the test; whatever other constructs might be attempted.

So, the whole proposition of driving more sheep into the pen was iffy from the start.

Could failure to buy insurance be deemed even a "misdemeanor;" of what? Can one be required to report (to the IRS) information not related to Income, Estate or (valid by uniformity or enumeration) Excise Taxation?

Doc Merlin writes:

Isn't the purpose of being able to tax, from a game theory understanding of politics to harm your political enemies?
As students of economists we should understand that incentives matter. The whole system is set up to incentivize punishing one's enemies and helping one's friends.

This leads me on a slight digression, that shows me the founders' wisdom. They explicitly made it illegal for the US to collect taxes (unfortunately not tariffs as well) based on anything other than the population of the state.

Frankly, using tax law as a punishment for one's enemies is extremely dangerous, and makes me think we should go to a much flatter system with little if any exceptions in it, if only to make it hard to abuse.

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