News Every Day |

Breaking News: Insurers Aren’t the Problem, Government Is

Americans were justifiably shocked when UnitedHealthcare CEO Brian Thompson was murdered on a midtown Manhattan street last December.  Perhaps more shocking was the reaction among those who rationalized the crime as a consequence of legitimate frustrations with skyrocketing healthcare costs, rising premiums, denied claims, and a healthcare system that seems to place patients near the bottom of its list of priorities. (RELATED: Rage Against the (Healthcare) Machine)

The devastating California wildfires that erupted shortly thereafter have fueled a parallel narrative, with those who have lost their homes outraged over dropped coverage. A key factor in insurers’ decisions to cancel policies, decline renewals or cease underwriting new property exposure was state regulations that limited their ability to increase premiums commensurate with heightened risk. (RELATED: California Incinerated Its Insurance Market)

What do these two stories have in common?

Each tragedy — and the ensuing reaction — illustrates the public’s misapprehension of the government’s role in creating the problem. Public officials cynically deflect all responsibility with threadbare tropes about “corporate greed” and “price gouging.”

Such demagoguery seeks to turn policyholders’ righteous anger away from those largely responsible for the rising cost, limited availability, and inferior quality of coverage: public officials, not insurers. This misdirection feeds flawed explanations of why such problems exist, and the ineffective policies proposed to address them. The wrong “villains” are targeted; in the case of Mr. Thompson, tragically so.

Consider healthcare. The mechanics of the Affordable Care Act (ACA), and American healthcare provisions more generally, give rise to distortions through the value chain as a result of government regulation and market intervention. For example, the ACA’s 80/20 rule sought to suppress healthcare premium growth by limiting insurers’ margins. Studies have shown this results in perverse incentives and unintended consequences — the capped margin effectively rewards insurers for paying more in claims, allowing them to increase profits not through efficiency, but through a larger top line. Rather than resulting in an increased quality of care, higher claims payments engineered to drive revenue growth are more likely to allow for the capture of economic rents by both providers and insurers.

Similarly, California’s insurance regulators in recent years determined that property and casualty insurers operating in the state would be subject to price controls, with requested premium increases requiring a detailed justification. Crucially, regulators determined that any proposed increases be supported by a risk analysis based on historic loss experience, not a prospective view of property risks from fires. In addition, recovery of reinsurance costs — a common risk mitigant for insurers — could not be included in their models. Rather than earn inferior returns or risk outsized losses, insurers including State Farm, Allstate, and Farmers Insurance elected to exit or limit their exposure in California.

The Problem

Commercial insurance companies are private enterprises seeking a profit.  They undertake rigorous actuarial and financial analyses and write policies designed to ensure the income they generate from premiums and investment income exceeds that expended to pay claims and overhead expenses and earn a return on capital consistent with the risk underwritten. Capping premiums, particularly in a rising claims environment, makes this math unworkable.

Reasonable people can disagree as to how to apportion heightened fire risk among climate change, inept forestry, wrongheaded water management, and unchecked development (and note government plays no small part in many of these as well), but it is difficult to maintain that such risk is not increasing in California.

State actions interfere in markets beyond that of insurance; inflation in higher education is one prominent example.  No matter the manner enacted or the severity of the consequences, government meddling in private markets which results in limiting the supply or increasing demand is a) more common than most people realize and b) unacknowledged or poorly understood when it does occur, each of which inevitably contributes to c) political blame-shifting and d) further government intervention.

Government Meddling

Some will argue — Economics 101 textbook in hand — that the state has no choice but to intervene in private markets when a “market failure” occurs, i.e. when goods or services are inefficiently allocated due to an improperly functioning marketplace.  When markets “fail” in this manner, the price signals which stimulate demand and induce supply fail to work as intended.

In the real world, more likely than not it is the state itself, in pursuit of some policy objective — expanding coverage, reducing prices, increasing “access”, and the like — that causes malfunctioning markets, rather than remedying them. The typical intervention trajectory is as follows: private markets operate more or less efficiently, the government intervenes in pursuit of some desired policy result, market distortions ensue, the government doubles down to fix a problem it has itself created, and private providers of the good or service exit the marketplace.

Ultimately, the government controls all or substantially all of the market.  Addressing purported market failures is often a cover for the pursuit of some other objective under the guise of promoting greater efficiency, and degrades rather than promotes working markets.

It’s understandable that people are frustrated with rising costs and inadequate or unavailable insurance coverage. But one needn’t be a financial whiz to understand the profit motive, and most people intuit that a business needs to earn a profit and, if unable to do so, will stop offering unprofitable products or cease operations.

Americans aren’t outraged by companies and their owners getting rich if they provide a high-quality product. But when they don’t understand the government’s surreptitious role in disrupting markets and can only “see” rising prices or that a critical product is no longer available, they are far more likely to blame the provider, not the true culprit.

One expects those committed to the ever-expanding government to advocate for unnecessary or excessive market interventions, shift blame when disaster strikes, and “not let a crisis go to waste” by promoting further intervention.  While not necessarily opposed to delivering services efficiently, the foremost objective of statists is to expand the scope of the public sphere.

What is more disappointing is that those who purport to believe in markets do such a poor job of defending them, and are easily cowed in the face of inflammatory anti-market rhetoric.

The American public deserves leaders with stiffer spines, who can present unbiased, clearly articulated diagnoses and offer actionable solutions to problems that benefit rather than harm citizens and consumers.  California — with its recall system and other tools of direct democracy — offers just such an opening for truth-telling public servants, if only voters will insist upon transparency, good faith, and competence from their government.

READ MORE from Richard J. Shinder:

Historical Determinism and Human Nature in the Age of Trump

Win or Lose This Fall, a New Republican Party

Never Trumpers Are Revealing Who They Really Are

Richard J. Shinder, a fifth-generation Californian, is the founder and Managing Partner of Theatine Partners, a financial consultancy.

The post Breaking News: Insurers Aren’t the Problem, Government Is appeared first on The American Spectator | USA News and Politics.

Москва

Покосилась и просела. Как сейчас выглядит могила актера Георгия Вицина

Реклама
Top 6 nutrition questions men should ask themselves after 40

To maintain health and remain full of energy, men will be helped by this

One of Britain’s oldest pubs suddenly closes after 570 years as punters cry ‘Friday nights won’t be the same’

‘I can’t go into details’ – Liverpool boss Arne Slot breaks silence on red card controversy and mystery over ban

Shamed football manager banned for life for thumping linesman in sickening attack

Team India players, including Rohit and Virat, head to Dubai for Champions Trophy

Ria.city
Реклама
  • ИП Попов А.П.
  • ИНН: 602715631406
Ревматолог: "15 февраля 2024 в г.Колумбус запущена квота"

Каждый человек с больными суставами имеет право получить...






Реклама
  • ИП Попов А.П.
  • ИНН: 602715631406
Ревматолог: "15 февраля 2024 в г.Колумбус запущена квота"

Каждый человек с больными суставами имеет право получить...


Реклама
  • ИП Попов А.П.
  • ИНН: 602715631406
Ревматолог: "15 февраля 2024 в г.Колумбус запущена квота"

Каждый человек с больными суставами имеет право получить...

Read also

Shoppers are racing to nab ‘stunning’ new £6 Primark travel bag – there’s five colours & it’s perfect for EasyJet

Flight passenger's awkward seat assignment has travelers sounding off

Steve Kerr: I don't blame Kevin Durant one bit for not wanting to rerun things here

News Every Day |

Ultra-woke parent group prez resigns, blasting officials as ‘fascists’

The lefty president of a woke Brooklyn parent group resigned last week with a scathing message blasting city officials as “fascists.” Marissa Manzanares, the interim president of the Community Education Council for District 14’s Greenpoint and Williamsburg, submitted her resignation on Monday, according to sources. “Dear FACE and DOE Fascist Administrators,” began her message to...
Ria.city






Read also

Trump executive order would defund schools that require Covid vaccines

5 bedroom Villas for sale in Marbesa – R4882150

I drove Porsche’s hi-tech £167k Cayenne Turbo – the posh hybrid SUV flies but it’s the headlights that I’m obsessed with

News, articles, comments, with a minute-by-minute update, now on Today24.pro

News Every Day

‘Goodness me’ – Former Masters champion Patrick Reed gets drenched in beer after making hole-in-one on famous party hole

Today24.pro — latest news 24/7. You can add your news instantly now — here


News Every Day

One of Britain’s oldest pubs suddenly closes after 570 years as punters cry ‘Friday nights won’t be the same’



Sports today


Новости тенниса
WTA

Александрова проиграла Анисимовой и не смогла выйти в финал турнира WTA в Дохе



Спорт в России и мире
Москва

Ефимов: за пять лет инвесторы построили в Москве 58 спортивных объектов



All sports news today





Sports in Russia today

Москва

Депутат Мособлдумы отчиталась перед жителями Воскресенска о проделанной работе


Новости России

Game News

Состоялся релиз головоломки Tiny Robots: Portal Escape от Snapbreak


Реклама
Top 6 nutrition questions men should ask themselves after 40

To maintain health and remain full of energy, men will be helped by this

Реклама
Top 6 nutrition questions men should ask themselves after 40

To maintain health and remain full of energy, men will be helped by this

Реклама
The most beautiful beach towns with cheap living

A huge number of people around the world dream of one day breaking out of the daily routine

Russian.city

Реклама
Top 6 nutrition questions men should ask themselves after 40

To maintain health and remain full of energy, men will be helped by this


Москва

Учимся с умом: не дайте ИИ задурить вам голову


Губернаторы России
Сергей Собянин

Собянин: Пожарно-спасательные вертолеты города теперь ремонтируют в Москве


Учимся с умом: не дайте ИИ задурить вам голову

Их свела новостройка: что делать, если в лифте застреваешь "По любви"

Кадеты шатурского «Гвардейского класса» посетили с экскурсией ОМОН «Пересвет» Росгвардии в преддверии дня образования подразделений боевой подготовки.

Ракета SpaceX вывела на орбиту более 20 интернет-спутников Starlink


Возмужавший сын Полины Гагариной вышел в свет с возлюбленной — копией мамы

«Когда кончится это пиарство?» — Волочкова «наехала» на жену экс-супруга

Девушка рэпера Тимати Валентина выложила фото в платье с глубоким декольте

«Выпускник Гнесинки не остаётся без работы»: ректор академии — об истории вуза и его влиянии на мировую культуру


Марсель (ATP). 1/4 финала. Чжан сыграет с Бергсом, Медведев встретится со Штруффом

Карьера Елены Рыбакиной оказалась под угрозой

Депутат Журова объяснила политикой разницу дел Синнера и Валиевой

Даниил Медведев вышел в полуфинал турнира ATP-250 в Марселе


Реклама
Top 6 nutrition questions men should ask themselves after 40

To maintain health and remain full of energy, men will be helped by this


К праздникам «Тануки» запустили лимитированное меню

ТОП-3 лучших сервисов доставки готовой еды в Москве

К праздникам «Тануки» запустили лимитированное меню

Секрет профессионального ухода за кожей раскрыт: AIRY AROMA


Работники филиала «Забайкальский» компании «ЛокоТех-Сервис» поддерживают Краевой специализированный дом ребенка

Винник на Фогеля

Кадеты шатурского «Гвардейского класса» посетили с экскурсией ОМОН «Пересвет» Росгвардии в преддверии дня образования подразделений боевой подготовки.

Учимся с умом: не дайте ИИ задурить вам голову


В Москве арестовали пытавшуюся продать младенца за тысячу долларов мать

У полковника в отставке выманили 7,8 млн руб. через схему с "заменой счетчиков"

Полковника из Москвы обманули на 7,8 миллиона рублей через «замену счетчиков»

Кинотеатр Ереван, 1978 год, Москва


Реклама
The most beautiful beach towns with cheap living

A huge number of people around the world dream of one day breaking out of the daily routine


Путин в России и мире
Реклама
The most beautiful beach towns with cheap living

A huge number of people around the world dream of one day breaking out of the daily routine



Реклама
Top 6 nutrition questions men should ask themselves after 40

To maintain health and remain full of energy, men will be helped by this



Реклама
Top 6 nutrition questions men should ask themselves after 40

To maintain health and remain full of energy, men will be helped by this



Реклама
Top 6 nutrition questions men should ask themselves after 40

To maintain health and remain full of energy, men will be helped by this

Персональные новости Russian.city
Егор Летов

Памятник рокеру Егору Летову поставят в Омске



News Every Day

Team India players, including Rohit and Virat, head to Dubai for Champions Trophy




Friends of Today24

Музыкальные новости

Персональные новости