Tuesday, May 18, 2010

Surprise! Mass. Insurers Hemorrhaging Cash

Cross-posted from Critical Condition on National Review Online.

The Boston Globe is reporting that the four largest health insurers in Massachusetts—Blue Cross Blue Shield, Harvard Pilgrim Health Care, Tufts Health Plan, and Fallon Community Health Plan—lost a combined $152 million in the first quarter of 2010. The companies stated that $116 million of those losses were directly caused by the April 1 institution of price controls by the state’s insurance commissioner. This is exactly what insurers predicted would happen when they filed a lawsuit in Boston last month.
“The health plans are not collecting enough premiums to cover their costs,” said Lora Pellegrini, president and chief executive of the Massachusetts Association of Health Plans. “These results support what we’ve said: that the plans would lose millions of dollars from this scheme and it would do nothing to control underlying health care costs.”
This news will cheer members of three overlapping groups: those who believe that profit is an offensive idea in the realm of health care; those who believe that corporate malfeasance is responsible for most social ills; and those who want the private insurance market to collapse, so that it can be replaced by a socialized model.

But for those who are unfortunate enough to have health insurance in Massachusetts, it is an alarming development. It is also one with national ramifications, as Obamacare rolls the Massachusetts model out across the country.

Massachusetts’ problems are not hard to figure out. Between its forest of insurance mandates and its hospital oligopolies, the cost of health care in the Commonwealth is soaring. Insurance premiums are the symptom, and not the cause, of this problem. But local politicians have been taking their cues from the White House, which has decided that demonizing insurers is easier than actually improving the health care system:
That effort got a fresh boost yesterday from another state report that disclosed that many of the state’s biggest health providers are sitting on large reserve funds, some in excess of $1 billion. At the same time, the state Senate is preparing to vote on a proposal that would require many hospitals to make one-time contributions totaling $100 million to help small businesses pay for health insurance.
Politicians’ claims that insurers were gouging consumers with reckless rate hikes have been exposed as untruthful. So now, the pols are trying a new line on for size: that insurers are greedily hoarding secret piles of excess cash. But insurers are required by law to hold assets in reserve, so that they can meet their future claims obligations without risking insolvency. The politicians are trying to let themselves off the hook, by demanding that insurers eat their near-term losses and deplete their long-term reserves.

The four insurers listed above—non-profits all—probably have enough in reserve to get through a few years of price controls. But after that, they will have to raise rates dramatically, in order to catch up with several years of health care inflation. If they can’t, they will go broke, and the Left will blame “market forces.” Don’t let them.

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