You Need To Control The Growth Of Premiums

The Los Angeles Times has good piece addressing one of the most underreported problems with the Baucus bill. The Baucus bill lacks sufficient mechanisms to slow the out of control increase in premium.

Democrats have shied away from regulating premiums in the face of charges from business leaders and Republicans that controlling what insurers charge would be meddling too much in the private sector.

As a result, while states have long supervised what companies charge for mandated automobile and homeowners insurance, the idea has been largely banished from the health care debate...

Nor are lawmakers seriously considering any proposals to regulate what doctors, hospitals, drug makers and other health care providers charge -- a strategy used by several European countries to control health care spending.

There are some countries that have universal health care provided primarily by a regulated marketplace of private insurers (Switzerland and Netherlands). These countries use a variety of heavy handed regulations to slow the growth of premiums.

A robust public option was meant to be the mechanism to control health care cost instead of pricing regulation. The idea was to have a public option that would not dominated the market, but would dramatically reshape the marketplace. A strong public option which could sell insurance plans at cost would provide the competition needed to discourage private insurance companies from gouging costumers. A public option would also allow the government to introduce and encourage the adoption of delivery system reforms which could hopefully produce high quality, low cost health care. If the reforms work for the public option, the hope is that they will be copied by private insurance companies.

If you don't have a robust public option than the system needs strong heavy handed cost control and pricing regulation. Baucus's plan has neither. Under the Baucus bill, everyone would be forced to buy insurance from private insurance companies, the government would foot the bill when the cost of premiums go over some percentage of income, and there is no regulation preventing insurance companies from raising premium as much as the can get away with. No one should doubt that this is a recipe for a costly disaster.