Friday, December 04, 2009

Obamacare may raise insurance costs by 54%

The Wall Street Journal writes:
The Blue Cross Blue Shield Association has found that premiums in the individual market will rise on average by 54% over the status quo, which translates into an extra $3,341 a year for families and $1,576 for singles. The White House denounced the report as a "sham" before it was even released, which shows how seriously it takes such concerns. ....

Blue Cross found costs will rise if Democrats force insurers to cover anyone who applies and then limit how much insurers are allowed to charge based on age or health condition. Economists call this adverse selection; people will wait until they're sick to buy coverage, and the Democratic rules make it perfectly rational for them to do so.
The Wall Street Journal quotes from a White House blog to illustrate just how clueless the Obama administration is about the relevant economics:
"And you can bet as we continue to make progress," communications director Dan Pfeiffer wrote on the White House blog, "the insurance industry will continue to try and distract and misinform because they know their very profitable status quo is in grave danger." He must be referring to the industry's overall profit margin of 2.2% in 2008. [Emph. added]
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