Consumer Power Report #212

Published March 5, 2010

It is the Winter of the Living Dead as the Zombies stalk Washington. Harry Reid and Nancy Pelosi are rampaging with glassy eyes, rotting flesh, and arms outstretched. They don’t know they are dead so they keep pushing for health care because it is the only thing they know how to do. It is what they did in life, so it is what they will continue to do until they are stopped.

I don’t remember how zombies can be stopped. Let’s see, a stake in the heart was for vampires, right? It was a silver bullet for werewolves, I think. But what stops a zombie? Maybe another election, though the elections in Virginia, New Jersey, and Massachusetts haven’t done the job. Wikipedia wasn’t any help, though it did have a pretty accurate description of the phenomenon — “zombies are depicted as mindless, unthinking henchmen under the spell of an evil magician.”

This past weekend was my annual Health Policy Poker Retreat in West Virginia. These guys are mostly former Kennedy staffers and Obama supporters. I’ve been playing poker and arguing politics with them for 25 years. Speaking of zombies, the buzz this year was how long will Bobby Byrd survive. Or perhaps he’s already dead and embalmed. They just roll him in when they need a vote. There are some pretty good taxidermists in West Virginia.

In any case, it looks like the Dems are going to keep pushing health care even while the entire country begs for mercy. Maybe that is the strategy. If they keep talking about it, we’ll all decide to let it pass just to shut them up. It is a very peculiar political strategy, but who knows? Maybe it will work.

And you thought they had outlawed torture.

— Greg Scandlen



Health care reform gets messier with every iteration. One week it is bigger than it was before. The next week they are talking about a scaled-down version. One week the talk is all about using reconciliation. The next week Harry Reid says nobody is talking about reconciliation. One week Rahm Emanuel is the muscle behind the push. The next week Washington is abuzz with talk about how the Obamaistas in the White House pay no attention to Rahm. YIKES!

The star of the big day-long summit at Blair House was Paul Ryan of Wisconsin. He provided clarity where everyone else was blowing smoke. It was a treat to watch him in action. Here is a transcript and video of his remarks.

SOURCE: Paul Ryan

More clarity came from William Tucker on the American Spectator blog. He makes the important point that despite all the hand-wringing about insurance company practices only 6 percent of the market buys individual health insurance, and thus are subject to individual underwriting. He doesn’t mention it, but it is also the case that underwriting kicks in only when someone is applying for coverage, so the number of people affected is smaller still. Yet for this teensy issue the administration wants to twist the entire system into pretzels.

He also points out that, “President Obama kept talking about how it is these ‘large pools’ in big companies that make insurance cheap, but that is not true. Large pools are only part of the equation. Equally important is that these employees are getting their benefits tax-free. This is a huge advantage not available to the uninsured population.” And he adds, “Yet another advantage of company-run health benefits programs is that they are exempt from state regulations. There was a lot of talk at Blair House yesterday about monopolies and how many states are served by only one or two insurance companies. There was also talk about how the government must mandate minimum coverage or people will not realize their insurance doesn’t cover much. What no one said is that all these mandates are now being imposed at the state level and it is precisely this that limits competition and makes insurance so expensive.”

SOURCE: Summit

The Wall Street Journal ran a great editorial that argues Obama’s latest offering “manages to take the worst of both the House and Senate bills and combine them into something more destructive.”

SOURCE: Wall Street Journal

But the calculations right now are whether Pelosi can get the votes to pass the bill in the House. On one hand, the White House is trying to change as many Dem “no” votes to “yes” by inviting them to the White House for a good talking to, and in at least one case offering a federal judgeship to the brother of one of the “no” voters. But the Associated Press reports Obama “could give wavering Democrats political cover by showing the party has been willing to compromise, ammunition against campaign accusations this fall that they rammed the bill through Congress with no regard for other views.”

SOURCE: Associated Press

On the other hand, AP also reports that Bart Stupak has at least 12 “yes” votes that will switch to “no” over the abortion language alone. Between that and the recent deaths and retirements of House Dems, Pelosi has a lot of ground to make up.

SOURCE: Associated Press

A good review of all this to-ing and fro-ing comes from Philip Klein at the American Spectator. He looks at Obama’s previous statements on using reconciliation as well as how it has been used before. There isn’t a lot new here but it is a nice compilation to have on hand.

SOURCE: American Spectator

But one of the most insightful and hopeful pieces I have seen comes from someone with a CIA background, Herbert Meyers. He writes, “America is on the verge of something unprecedented in history: the peaceful, constitutional replacement of our country’s entire political establishment.” He says:

Most of the time, we Americans don’t pay much attention to politics. We focus all of our energy on our jobs, our families, and our faith. We work hard, play by the rules, and wish only to be left alone. We love our country, consider ourselves blessed to be living here, and ask little from the men and women we elect except to keep from screwing things up.

He says the leaders of both parties “seem like children who’ve turned a party into a food fight. So we’ll replace them with a wholly new establishment — some of whom will be Republicans, others Democrats, and a few Independents here and there — and hope our next political establishment will get it right.”

He goes on to explain we have already overturned the establishment media, the educational system, and soon the financial services industry. The political establishment is doomed.

SOURCE: Real Clear Politics


It’s all enough to make you wonder if these jokers have any idea what they are doing … but then they pass another bill and remove all doubt. The most recent is the so-called antitrust bill against health insurers. The House passed HR 4626 on February 24 to exempt health insurers from the McCarran-Ferguson Act. For a while it looked like they were going to repeal McCarran-Ferguson altogether, but the P&C industry informed them that it, too, was subject to Mc-F.

Oh! Well, we’re not mad at the P&C industry. We just hate those eeeeevil health insurers. A notice from the National Association of Insurance and Financial Advisors (NAIFA) expresses concern that forbidding the pooling of historical claims data would disadvantage smaller carriers and decrease competition, and that “health insurance was not defined by the bill. The upshot of that could be that LTC, DI, medical provisions in auto insurance and even some aspects of life insurance could be construed by courts to be ‘health’ insurance.” NAIFA believes the latter concern was fixed but not the former one. It is not at all clear that there is support in the Senate for this legislation.


McCarran-Ferguson is poorly understood even by otherwise-bright people. On the MSNBC show Morning Joe, Joe Scarborough said it allows price-fixing between insurers. No, it doesn’t, as explained by National Underwriter, which writes, “the current antitrust exemption gives (insurers) no ability to join together to set prices or use acquisitions to build monopolies.” Insurers always have been subject to most federal antitrust provisions, including bans on price fixing, divvying up markets, and tying arrangements. They are also completely subject to state antitrust laws.

As NAIFA points out, the only thing that will be affected here is the ability of carriers to pool claims data for actuarial purposes. The result will be that small carriers won’t have enough historical information to project future costs. So they will not be able to determine how to price their products. So they will go out of business. So there will be less, not more, competition in the health insurance market.

These people seriously don’t know what they are doing.

SOURCE: National Underwriter


This ignorance is underscored by Obama’s sudden interest in having federal oversight of health insurance premiums. Once again, these people do not have the slightest idea of what they are doing. One company (WellPoint) issues rates that Obama thinks are too high. But his reaction is based on nothing. He has no idea if the rates are too high, too low, or just right. It is a political temper tantrum–period.

So he wants federal oversight and looks for excuses to justify his position. One reason cited by Kaiser Health News is that “more than half the states allow insurers to implement rate increases without first obtaining state approval.” Well, yes they do. But that doesn’t mean there is no oversight.

There are two approaches to rate regulation. One is “Prior Approval,” whereby the regulator has to approve the new rate ahead of time. The other is “File and Use,” whereby the rate goes into effect UNLESS it is denied by the regulator. In either case the regulator has the power to deny a rate increase. The only difference is what happens if the regulator takes no action. In one case it defaults to denial and in the other case it defaults to approval.

As I said, this is public policy driven solely by crass politics. The Kaiser story says, “In the past two weeks, Obama administration officials have tried to build public outrage over recent insurance rate hikes in the individual health insurance market, especially a 39 percent increase sought by Anthem Blue Cross of California, the largest for-profit health insurer in that state.” They have no interest in why these rates went up 39 percent, they just want to use it to inflame public opinion.

The New York Times reports, “Mr. Obama is seizing on outrage over recent premium increases of up to 39 percent.” So, Kaiser says Obama has “tried to build public outrage,” and then The New York Times says he is “seizing” on the outrage he has built. The Times goes on to explain, “The president’s bill would grant the federal health and human services secretary new authority to review, and to block, premium increases by private insurers, potentially superseding state insurance regulators. Officials said they envisioned the provision taking effect immediately after the health care bill is signed into law.”

Also in The New York Times, WellPoint CEO Angela Braly explains, “higher premiums were justified by soaring medical costs.” She added, “health care providers were charging more to the private sector, including our members, because payments from Medicare and Medicaid did not fully cover providers’ costs.” She also explained that many younger and healthier enrollees have dropped their coverage because of the recession. They have higher priorities when finances are tight.

Importantly, she noted that premiums in New York are double what they are in California because of New York’s guaranteed issue and community rating requirements — which Congress wants to apply to the entire country.

And John R. Graham of the Pacific Research Institute notes that while some people in California are getting a 39 percent premium increase, others are getting a 20 percent cut. It is curious how we hear about one but not the other.

Look, folks, this is all about as dumb as can be. The fact is that insurance companies set rates based on what they pay out. There is no other way to do it. Sure administrative costs may be too high and that is part of the reason to support HSAs — it is far more efficient to minimize the amount of services that go through an insurance mechanism. But even if admin costs could somehow be slashed to zero, the rate increases from underlying costs would still be substantial.

Adding federal oversight is nothing but a political stunt. How is the secretary of HHS supposed to know anything at all about local market conditions in San Bernardino, California? If she denies a rate increase and the company goes out of business as a result, who will suffer? Not her. It will be the policyholders.

When you add in the McCarran-Ferguson repeal, things get really wacky. Currently the states have very elaborate and time-tested ways to deal with insolvent insurance companies. They go into receivership and the state guaranty fund kicks in to cushion the blow for policyholders. If we have federal regulation of insurance companies, an insolvent company will be able to file for bankruptcy in federal court (they cannot do that currently.) That means policyholders will get no relief whatsoever.

The gross incompetence coming out of Washington these days is simply stunning.

SOURCE: Kaiser Health News; New York Times; Braley in NY Times; John R. Graham