Piping Up
By Sally C. Pipes | March 15, 2011
Forbes.com

As ObamaCare approaches its one-year anniversary next week, celebrations will likely be muted. Not only is the law's public support plunging--58% of Americans now favor repeal--health insurance premiums haven't fallen. In fact, they're skyrocketing.

Even The New York Times has taken notice. In an article last Monday<http://www.nytimes.com/2011/03/05/health/policy/05cost.html>, the Gray Lady noted that premiums have more than doubled nationwide, with small businesses getting hit especially hard. States like New Hampshire--which has one of the healthiest populations in the U.S.--has seen premiums for small and medium-sized employers rise by 20% to 60%.

In an effort to lower insurance premiums--and save its landmark law--the Obama Administration is trying to exert some control over the price of health insurance. Its efforts will shut down the insurance market--and ultimately reduce consumers' access to the choice of health care plan that fits their own needs.

Just last month, the government announced that it would offer $200 million to help states create insurance "rate review" programs. This represents the second wave of cash for state-level rate review initiatives. Last August, the Obama Administration handed out $46 million to 45 states and the District of Columbia for similar programs.

These programs allow state governments to prevent insurance companies from raising rates to "unreasonable" or excessive levels.

How does the government define "unreasonable"? That depends on whom you ask. ObamaCare provides no clear criteria by which to judge whether a rate hike is justified. Instead, it arbitrarily declares any rate increase of at least 10% suspect and thus subject to review by state regulators.

Starting in 2012, states will be able to establish their own thresholds. But if they come up with answers the feds don't like, then Washington can step in at any time and take over their programs.

If this sounds a lot like government price control, that's because it is. In effect, the government has empowered a group of unelected bureaucrats to set health insurance prices through the regulatory review process. This review process is wholly subjective--depending on whether regulators think a given rate is, to quote the new law, "discriminatory," "unjustified" or "excessive."

As with "unreasonable," all these criteria go undefined. But the implications are clear--the government plans to cap insurance rates. Insurers with premium increases that don't pass muster risk being excluded from the exchanges when or if they are launched in 2014.

Of course, ObamaCare has exacerbated the rise in insurance premiums. With all its new mandated benefits--including a prohibition on lifetime benefit caps that starts this year and will be fully in effect in 2014, a requirement that insurers cover adult children on their parents' policies until they turn 26, and free coverage for preventative care--the new health care law was destined to jack up the cost of insurance. After all, more comprehensive health plans cost more.

Requiring insurers to deliver more benefits--and then limiting the prices they can charge--will drive many of them out of business, leaving consumers with fewer choices. Lower levels of competition free insurers to charge more, which prompts calls for more rate regulation by government.

This cycle of madness is already unfolding in Massachusetts, whose health care reform initiative provided the model for ObamaCare. Bay State lawmakers empowered regulators to set prices. In the past year, the state has rejected 253 of 274 rate filings by insurers.

The rate caps haven't worked, as Massachusetts still has the highest insurance premiums in the nation. They've increased 6% to 7% for individuals beyond what they would have been without reform. Small businesses have been hit even harder, with premium increases 14% higher than the rest of the nation.

But rather than address the underlying causes of high health care costs, Massachusetts Gov. Deval Patrick is doubling down on his price controls by forcing them onto doctors and hospitals. The controls will no doubt reduce the supply of medical care, as providers will refuse to treat patients at a loss.

Such reductions in supply are the natural product of government attempts to control health care costs. If ObamaCare isn't repealed, we can expect stories like this to unfold nationwide in the years to come. And ultimately, all Americans will be covered under a single-payer, "Medicare for All" system where government is totally in charge of our health care.

Sally C. Pipes is President, CEO and Taube Fellow in Health Care Studies at the Pacific Research Institute. Her latest book is The Truth About Obamacare (Regnery).