Universal Health Care and the Mortgage Crisis

At its core, the mortgage crisis occurred when unqualified borrowers received mortgages they couldn't repay. There is a great lesson here, and it appears the government isn't attempting to learn it in regards to universal health care. In any industry, but certainly in the financial industry, when unqualified customers receive your product, it is a recipe for disaster. Insurance is no different than any other industry. If millions of unqualified people receive insurance, that is a recipe for disaster.

That's why this story is extremely troubling.

Without waiting for President-elect Barack Obama, Senator Max Baucus, the chairman of the Finance Committee, will unveil a detailed blueprint on Wednesday to guarantee health insurance for all Americans by facilitating sales of private insurance, expanding Medicaid and Medicare, and requiring most employers to provide or pay
for health benefits.


Aides to Mr. Obama said they welcomed the Congressional efforts, had encouraged Congress to take the lead and still considered health care a top priority, despite the urgent need to address huge problems afflicting the economy. …

Mr. Baucus would create a nationwide marketplace, a “health insurance exchange,” where people could compare and buy insurance policies. The options would include private insurance policies and a new public plan similar to Medicare. Insurers could no longer deny coverage to people who had been sick. Congress would also limit
insurers’ ability to charge higher premiums because of a person’s age or prior
illness.


People would have a duty to obtain coverage when affordable options were available to all through employers or through the insurance exchange. This obligation “would be enforced, possibly through the tax system,” the plan says.

In this plan, the government will force things upon people and entities that would normally not qualify in all sorts of ways.

1) Pre existing conditions

This is the most troubling. The government is showing a stunning amount of naivete. The government acts as though the only reason those with pre existing conditions are denied coverage is because insurance companies are mean vultures. The reason that those with pre existing conditions are denied coverage is because it isn't financially feasible to give them coverage. This is the definition of someone being unqualified and still receiving the financial product. If insurance companies could make money insuring those with pre existing conditions, they would insure all of them. Clearly, it's not profitable to do so.

So, what is the potential outcome of such action? There's only three possible outcomes. The insurance companies eat the loss in income. It bankrupts the insurance companies. Finally, the insurance companies make up for the losses by charging higher premiums to others. Since capitalists rarely eat a loss in profits, the reality is there are only two possible outcomes.

2) Limit on premiums charged to those with pre existing conditions.

This is the equivalent of someone with multiple mortgage lates and bank ruptcies receiving the exact same rate as someone with perfect credit. Not only will the federal government mandate that those with pre existing condition have to be covered, but the federal government will make sure that insurance companies can't fully account for the pre existing condition. These are insurance companies not charities. They can't be forced to cover someone that isn't profitable and then also not be allowed to charge them as if they have a pre existing condition. This guarantees that those with pre existing conditions, as a whole, will be a losing proposition for whatever entity is forced to take them on.

Again, there are really only two possibilities here. First, this bankrupts those companies that have to take them on. Second, they pass on the losses with higher premiums for everyone else.

3) Force employers to provide health insurance

There is more stunning naivete with this idea. Employers would provide health insurance if it was feasible for them to do so. Health insurance is one of many ways that employers attract the best employees. If an employer doesn't provide health insurance, it isn't because they are simply mean. It's because they aren't in a financial position to do so. If they are forced to do so, or face a tax, they will take on expenses they can't afford. Once again, there are only three possibilities here. First, they eat the losses. Second, they go bankrupt doing it. Third, they fire people, raise their prices, or cut their business in order to account for the extra imposed expense.

4) Make available to everyone insurance that is now only available to Congress

There is more lunacy here. If the insurance available now only to Congress could be available to everyone and be profitable for the insurance company, the insurance company would make it available to everyone. By forcing this Rolls Royce of insurance to be available to everyone, they force those that provide it to become unprofitable. Once again, there are only two previously mentioned possibilities from this.

It is stunning that this soon after the mortgage debacle the federal government would impose policy that would make the exact same mistake. This idea for universal health care is full of places in which people that are unqualified are mandated to do or receive something. That is a recipe for disaster.