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Thursday, February 18, 2010

Small Biz Health Care Daily: The White House and Health Insurance Costs

The February 18 Washington Post published an article noting that the Obama administration plans to step up its criticisms of the health insurance industry – specifically highlighting efforts to raise insurance rates.

This is nothing new. President Obama decided long ago that politics warranted demonizing insurance companies.

According to the article, an industry spokesman provided a response:

Robert Zirkelbach, a spokesman for America's Health Insurance Plans, the industry's main lobbying organization, said the administration's attention to insurance rates was misplaced, because its members were merely responding to changes in the prices charged by hospitals, doctors and pharmaceutical manufacturers. "The focus needs to be on the underlying increase in health-care costs," Zirkelbach said. He added that the spike in individual insurance rates also stems, in part, from the recession, which he said prompted some younger and healthier Americans to stop buying insurance, leaving companies to sell a greater share of their individual policies to people who are older and sicker and, thus, more expensive to insure.

Unfortunately, both the Obama administration and this response miss a fundamental driver of costs, i.e., government action. In reality, government mandates, regulations, taxes and third-party payments are major drivers of higher health care and insurance costs.

Of course, no one should expect the Obama administration to acknowledge this fundamental economic reality, since its objective is to impose more government control over health care. But if one is going to seriously discuss such costs, government’s role cannot be ignored.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

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