Health Care Summit – Health Insurance Premium Increases Fuel the Debate

President Obama’s Health Care Summit tops the news this week and planned rate increases by health insurance companies are fueling the debate!

Anthem Blue Cross of California has caused concerns to rise over planned rate increases of up to 39% for many of its customers that hold individual policies (those not covered under a group policy).  This move and similar moves by other insurance companies around the country have caused cries for more government regulations and in effect, for price controls.  Anthem Blue Cross responded by expressing sympathy, but stated that rising health care costs are the real problem.  After all, they have to pay the bills.  What should be done about these rate increases?  Should the Federal or state governments control insurance premium prices?

From an economic perspective, the answer is a resounding NO!  To fix the skyrocketing health care costs we are experiencing, we need more economic freedom and a truly free market in health care.

Why won’t price controls work?  For one thing, history shows they never work in the long run.  Price controls (that keep prices artificially low) encourage demand (more people want more things when they are cheap).  Plus, price controls discourage supplies (why should a company provide a product or service if they can’t make money).  Price controls can even force some companies out of business.  They can’t make a profit or worse yet, they lose money.  With increasing demand and decreasing supplies, price controls also lead directly to rationing.

Instead of price controls, America needs a free market in health care.  Doctors, hospitals, drug companies, and insurance companies need to be free to set prices, create new services and products, and innovate.  Innovation and pricing flexibility lead to lower prices and high quality health care.