- The Washington Times - Thursday, February 25, 2010

Americans are going to hear lots of scare- mongering anecdotes at today’s health care summit, such as the 39 percent increase in insurance premiums announced this month by Anthem Blue Cross, a California company. President Obama and the Democrats have a solution: Pass a law to impose additional coverage by insurance companies, eliminate the multimillion-dollar cap insurance policies have on total benefits, and pile on lots of new red tape. These policies are guaranteed to raise rates.

California does offer a useful case study, but not for the reasons Democrats think. New regulations there make some people subsidize others in the individual insurance market. Young people pay more than what it costs to insure them, and older people pay less. The same discrimination occurs broadly between healthy and not-so-healthy people generally. Government-imposed pricing led many healthier people to stop buying insurance, which meant insurance companies ended up subsidizing coverage for unhealthy people. State regulations made higher rates inevitable.

Democrats insist they have some magic secret to provide more benefits for less cost. That companies are fighting so hard against new federal regulations makes it clear those businesses are worried proposed policies won’t do what Democrats promise.

To make matters worse, the new plan Mr. Obama rolled out on Monday gives the federal government new powers to block what bureaucrats determine to be “excessive” rate increases by health insurance companies. The Economics 101 lesson is that price controls cause shortages. Regulations that force up costs combined with price controls will make the shortage problem even worse. Price controls mean firms lose money, and many simply choose to stop offering the given product. If the goal is to lower costs, a better idea is to get rid of recently imposed regulations and stop threatening even more government intervention.

If the number of uninsured is a problem, Democratic proposals will exacerbate that problem. There is only one way for each insured person to get more coverage at a lower price without lowering insurance company costs - and that is to cover fewer people.

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