David R. Henderson  

Unintended, but Totally Predictable, Consequences

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Even though this action was a totally predictable response to the incentives we set up, it's unwarranted and unnecessary.

Last April, I posted on how the health care law passed by Congress would likely cause some insurance companies to drop coverage of children. I was a little off. Two insurance companies in Florida aren't dropping coverage for children who already have coverage: they're just refusing to cover children who don't already have coverage. I should have predicted this because the main thing insurance companies want to protect themselves against is people gaming the system by waiting until their children get sick and then buying coverage. If the children are already covered, renewing their coverage makes the gaming problem much less.

And how did the U.S. government respond?

Jessica Santillo, a spokeswoman for the U.S. Department of Health and Human Services, decried the decision by private health plans. 'We're disappointed that a small number of insurance companies are taking this unwarranted and unnecessary step,' she said."

The news story doesn't report, though, why Ms. Santillo thinks the move was "unwarranted."

Update: Belated hat tip to National Center for Policy Analysis, "What Does Health Reform Mean for You? A Consumer's Guide," p. 15


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COMMENTS (2 to date)
fundamentalist writes:

That these insurance companies wouldn't cover children probably seems heartless to many people, but keep in mind that insurance companies would cover any risk no matter what it is if they are allowed to charge a premium that covers the risk. They can't with healthcare because all states have price controls on premiums. Insurance companies have two choices with uncovered children: 1) cover the child and lose a lot of money, then try to persuade the insurance commission to allow a rate hike for all members to cover the loss or 2) deny coverage. As Henderson wrote, it's totally predictable but most politicians didn't want to see it.

ticovanzant writes:

fundamentalist is absolutely correct. Many politicians and so-called public servants refuse to realize that companies are in business to make a profit for their owners (shareholders) not to be endlessly benevolent.

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