Physician Paul Hsieh explains how the health insurance industry is eager to exit the free market. Maybe the executives are hoping to keep their jobs rather than be forced out of business by government crowding?

Sensing the changing political winds favoring “universal health care,” the largest trade group for health insurers (American Health Insurance Plans) recently agreed to accept regulations requiring them to sell individual policies to all patients regardless of preexisting illnesses. In the past, they had opposed such requirements as too costly. However, they’ve now agreed to accept such regulations in exchange for a law requiring all Americans to purchase health insurance.

At first glance, this might look like a good deal for the insurance companies. They would receive a seemingly guaranteed market for their products (as if Congress had bailed out General Motors by requiring all Americans to purchase a new GM car every few years.) But this guaranteed market would come at a steep price. A “Federal Health Board” would impose onerous political controls on insurers, specifying which patients they must accept and which benefits they must offer. Insurers would be required to sell policies at prices the government deemed “affordable.” Private insurers would also have to compete with taxpayer-subsidized government insurance plans. As health costs continued to rise, such an arrangement would become unsustainable. No business can survive long when the government forces it to sell $2,000 worth of services, but only allows it to charge $1,000.

When South Dakota and Kentucky passed similar laws, many insurers left these states rather than operate at a loss. Similar laws at the national level would likely drive many insurers out of business altogether.

The inevitable collapse of the private insurance market would then leave millions of Americans without insurance coverage. Although this collapse would be caused by government regulations, pundits would undoubtedly portray this as a “failure of the free market.” Politicians would demand that the government “rescue” health care from “greedy capitalists.” The end result would be a “single payer” socialized medical system like Canada or Great Britain’s.

If the insurance industry and the doctors won't stand up against this, I'm pessimistic of our chances.

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