A state of inflexibility

A key state Senate committee vote Wednesday brought California one step closer to making healthcare insurance and consequently health care itself more costly, less accessible and even more under the clumsy control of government bureaucracies.

The Senate Health Committee voted 5-3 in favor of Assembly Bill 52 by Assemblyman Mike Feuer, D-Los Angeles. The bill would give government power to reject insurance rate increases and even order price rollbacks; it already has passed the Assembly and now goes to the Senate Appropriations Committee.

AB 52 would use government’s heavy regulatory hand as state approvers would judge whether rates are "excessive, inadequate or unfairly discriminatory," a subjective authority that should make anyone who understands how free markets really work quake with trepidation. It is vigorously opposed by practitioners, insurers and hospitals.

As each successive government intrusion drives costs higher, and makes treatment less accessible and discourages providers from participating, the government’s inevitable solution is to prescribe another dose of the same bad medicine. Rather than more layers of expensive interference, legislators should remove government’s impediments to encourage the private sector to lower prices and expand coverage and availability.

Instead, AB 52 would duplicate Obamacare regulations on insurance premiums and ratchet up the intrusion of last year’s state Senate Bill 1163, which authorized government to police premiums.

AB 52 also would empower the state to roll back premiums, order refunds and impose penalties based on government bureaucrats’ determinations.

The stated intentions may play well as sound bites on television news, but any service provider or merchant knows intuitively the harmful effects when government dictates prices.

Price-setting will not constrain rising healthcare costs without restricting access. Insurance providers only pass through costs of treatments, tests, hospitalization and drugs and are constrained in setting price ceilings by competitive providers. Government imposing artificial, arbitrary limits on how much an insurance company can charge doesn’t change real world costs, but it does undermine competition.

Government setting prices too low or too high will destabilize the market. Inevitably, this will drive private insurers, unable to plan or recoup their costs, out of California.

Health care will not be delivered more cost-effectively by cloistered government bureaucrats, insulated from the consequences of their decisions and incapable of calculating the myriad fluctuating factors of supply and demand.

We urge the full Senate to defeat AB 52. We urge legislators to permit consumers to pay for only coverage they want by eliminating

49 coverage mandates imposed on California insurers, and to allow purchase of insurance across state lines to allow competition to have its downward pressure on prices. We urge creation of a privately run co-op to handle demand from small businesses to offer affordable coverage choices, as well as creation of a high-risk pool. We urge the Legislature to deregulate, rather than heap more inflexible rules on health care. But given Sacramento’s inclinations, we’re not optimistic.