Last week’s news that Anthem Blue Cross, California’s largest for-profit health insurer, was planning rate increases of up to 39 percent for March 1, has provided fodder for liberals to argue that it proves why we need to pass Democratic health care legislation. The Los Angeles Times, which first reported the story, editorialized that, “Anthem’s actions offer the best argument yet for Congress to complete work on a comprehensive bill without delay.”
But in reality, the news proves the exact opposite — why we need to scrap the liberal vision of health care legislation and move toward a market-based approach offering real choice and competition.
Anthem’s policyholders are held hostage by the company’s rate increases as a result of existing bariers put in place by government. Because the tax system is rigged in favor of those who obtain insurance through their employer, we’ve never been able to develop a true individual market for health insurance, as we have in other sectors of our consumer-driven economy. In addition, the federal government bars the sale of insurance across state lines, which limits choice even further. On top of that, because of the heavy regulations that states put on insurers in the individual market, only larger companies who can afford to pay the compliance costs are able to remain in business. If you were to change the tax code, allow interstate purchasing of insurance, and remove the bariers to entry for smaller players, it would create a lot more competition in the market, and Anthem wouldn’t be able to get away with hiking rates so dramatically in California.
The Democratic health care bills create the illusion of more choice by setting up exchanges, but those exchanges would be government-run, and each of the policies offered would be designed by government, which would dictate what benefits would have to be covered. It would also favor the large insurance companies who can bear the cost of the new regulatory regime. It’s no surprise that in November, the Congressional Budget Office estimated that if the Senate health care bill were enacted, premiums in the individual market would be 10 percent to 13 percent higher in 2016 than they would be if no bill passed. In dollar terms, that would mean that a typical family policy would be $2,100 a year more expensive.