Much like oil, natural gas, and other industries with products we simply can’t often forego, insurance companies operate on a pretty thin profit-margin; on average about 3%. We know this because most are publicly held entities, and must report their earnings. While this seems to be too thin of a margin to be true, it is in large part due to these industries not being subjected to the whims of the market as much as others. They don’t need to build up money in the good times to survive the bad—their business is fairly constant.
For instance, jewelry sales, an industry with profit margins that are significantly higher, often tank in a bad economy—that diamond necklace can wait when times are tough. But, you still need gas and insurance no matter what the economic conditions are.
With that being said, if insurance companies could achieve higher profit margins, they owe it to their shareholders to do so. So why don’t they? The problem is that “pesky free-market capitalism.” If one company raises their rates and another doesn’t, the former better be offering something the latter doesn’t or while their profit margins may rise, their actual profits will sink like a mobster with cement shoes.
So now let’s look at the Affordable Care Act (ACA), because a coworker asked me if I was for or against the law.
First let me point out that I can’t say that I’m completely against the law, it’s 9,625 %$#@ pages, depending on how you count it! I don’t know one hundredth of what is in it. There could be 20 pages worth of things that literally say something to the effect of, “…and The Logical Libertarian blog is to receive a $100,000 monthly stipend” for all I know. In which case, my opinion has just evolved in light of new evidence.
But when I consider that the U.S. Constitution is only six pages long, and it’s a damn-effective framework for a whole country to operate from, I’m pretty comfortable in saying the ACA is probably the quintessential Rube Goldberg of legislation—massively overcomplicated.
However, as people complain about this law for various reasons, one thing that is often overlooked is the intent behind it.
Most of the people behind the ACA take issue with private health insurance companies. While it’s hard to paint a doctor as an uncaring jerk, it’s quite acceptable among the ignorant to attack those evil insurance companies; just watch Bob Beckel on FNC‘s The Five on any given day. The left have conditioned generations of people to forget that insurance companies are simply composed of people with equal unalienable rights as the rest of us, who offer you their money to buy a risk you cannot afford to take yourself. They are not a diabolical monolith hell-bent on draining your blood and back account in one fell swoop.
But here’s where the people behind this bill and their atrocious math come in. The ACA was aimed squarely at health insurance costs, not healthcare costs. Since insurance companies are operating on a 3% profit-margin, that means that for every $100 you spend on health insurance, $97 goes to the doctor, medical staff, and insurance company operating costs (something that will have increased, not decreased, to comply with new regulations), $3 goes to the health insurance company’s bank account.
Now lets imagine that this bill completely eradicated every single dollar of health insurance profit, your $100 health insurance bill would now be $97. I don’t know about you, but if I’m trying to reign in burgeoning costs of a bill that’s divided up 97:3, I think I’d focus my efforts on lowering the $97 portion before worrying about the $3 one.
So why didn’t they? I believe there are two issues at play.
Many lawmakers are lawyers by trade, including the president. Legal reforms such as limiting frivolous lawsuits, loser-pays legislation, or my proposal to indemnify people from punitive damages for immediate acceptance of liability (proposed in a previous post here) would severely reduce the income of the ambulance-chaser sub-species of legal counsel.
But if we consider the idea that a group of lawyers in Washington are going to pass reforms that would negatively affect the livelihoods of some of their former schoolmates, chances simply aren’t that good. There’s always going to be a sense of loyalty to their fellow law school alum, and sadly it seems to have overridden their oath of office and loyalty to their constituents. These proposed reforms are about justice for those who are being abused by a litigant using the court system as a method of intimidation and ill-gotten gains. There is no rational explanation to oppose them if justice is your goal.
If lowering health care costs isn’t important, just the health insurance costs, they could have opened up insurance markets to increase competition across state lines, dropped coverage requirements, etc., but they didn’t do this either. Capitalism has only been effective for hundreds of years, I’d link to think it has proven itself.
But this bill was passed by people who largely want socialized health care; something they know the populace isn’t willing to accept. They call it “single-payer” because they know “socialism” carries quite the stigma, but I refuse to allow them to rename poison to get me to swallow it.
These lawmakers are offended private health insurance companies even exist because they believe a right to life, and a right to health care are synonymous, and therefore a duty of government. I appreciate the altruism behind it, but that doesn’t make it any less nonsensical.
The problem is that health care isn’t just a thing that exists in the world like food, air, and water that people can consume as needed. It is a service provided by someone who has spent large sums of money and eons of time on education in the field. One person does not, nor ever will have the right to the time and effort of another in a free country.
So if that’s true, and we agree doctors deserve to get paid, why am I against government paying them as a collective then? As cold as it may sound, if I was not physically responsible for you being in a wheelchair, I should not be financially responsible for your wheelchair.
If you want help—ask for it. If I can afford and desire to, I will—it’s called charity, and it’s abundant here. What shouldn’t happen is me being pilfered at the point of government’s gun.
Now that the website is failing, rates are going up, and people are losing their plans that Obama promised they wouldn’t, I think it’s fairly clear that mistakes were made and lies were told. The only way Obama wasn’t lying about being able to keep your plan is if he honestly didn’t know what was in the bill either. The new higher coverage-requirements literally guaranteed this would happen by law.
But maybe they were crazy like a fox all along. Because these policy drops and rate increases, while induced in their entirety by big government, will assuredly be blamed on the evil insurance companies, and then used to promote a healthcare system former Mother Russia would be proud of.
So as we complain about the failed website, the assaults on liberty, the tort reform that didn’t happen, the deregulation promoting competition that were left on the cutting-room floor, and the host of other issues with this law, lets not forget that even if it had been 100% effective, it would still have only lowered costs by a measly 3%, because there was nothing to address health care costs, only health insurance costs; proving once again that math, logic, & reason and big government liberalism are still perfect strangers.