The End of Private Insurance?

I have been following the health care reform debate, and there is an important point that is not being discussed.  According to the reports, the proposed health care legislation requires insurance companies to take anyone, without considering pre-existing conditions, and it forbids them from charging people with health problems more than anyone else.  The goal of helping those who are currently “uninsurable” to get medical insurance is a wonderful, and we need to address this problem.  But what about the other consequences of such a policy?

I am not an economist, but wouldn’t that have the effect of significantly increasing the insurance premiums for all of us?  If insurance companies are required to accept a new group of people with serious medical problems then they will have to pay out a lot of money.  To get that money, they will need to raise rates.  Since they can’t charge sick people more (a good thing), they will have to raise the rates on everyone.  Is there anything wrong with my logic here?

The rhetoric is that the main problem is the “insane profits” of the insurance companies.  So I guess that the assumption is that the insurance companies can absorb the increased cost without raising rates.  But publicly traded companies are required to report their profits, and last year health insurers posted a 2.2% profit.  I’m not sure that 2.2%qualifies as an “insane” profit.  It’s always good to check the facts.

I read an article last week that stated that there were several states that already have established the above policy.  I wish I could find that article again, but I can’t.  As I recall, it said that for a 30 year old male non-smoker in one state the insurance premium would be something under $300.  For an identical man in a neighboring state with this policy the premium would be over $700!  That isn’t a projection, it is the fact right now.  Again, I’m sorry that I can’t find that article right now, but I thought that this is something that should be brought to our attention.

Someone needs to look into this.  If it is true that some states already have this policy, there should be a detailed comparison of health insurance rates in those states as compared to neighboring states.  It could give us a good idea of what might happen nationally.  Why isn’t anyone looking into this?

If the rates on private health insurance rise substantially, then the taxpayer subsidized government option will be too much of a bargain to pass up.  If larger companies are eventually allowed to offer the government insurance to their employees, why would they offer anything else?  In such an environment, how could the private insurance companies even survive?  Those who are on the suspicious side might see this as a deliberate plan to move us to a “single payer system” (i.e. government run health care).  What do you think?

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"True humility is not thinking less of yourself; it is thinking of yourself less." -- C. S. Lewis