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Does the U.S. Really Have a Free Market for Health Insurance?

October 25, 2011 in Health Insurance, Regulation | 6 comments

Conventional wisdom holds that the U.S. has a free market for health insurance and Europe relies on a state-run, socialist health care system.  The U.S. ‘free market’ for health insurance, however, is in fact strictly regulated.  States exert significant authority over what benefits plans can offer and what premiums they charge.  Consider the following evidence compiled by the GAO regarding the State regulatory environment in 2010.

  • The McCarran-Ferguson Act provides states with the authority to regulate the business of insurance, without interference from federal regulation, unless federal law specifically provides otherwise.
  • Nearly all—48 out of 50—of the state officials who responded to the GAO survey reported that they reviewed rate filings.
  • Insurance departments in 19 states were authorized by their state to approve or disapprove proposed premium rates in all markets before they went into effect—known as prior approval authority
  • Insurance departments in another 10 states were authorized to disapprove rate filings in all markets, but not to approve rate filings before a carrier could begin using the premium rate or rates proposed in the filing. [In 9 of these states, carriers were required to submit rate filings prior to the effective date of the proposed rate—known as file and use authority. In one state, carriers could begin using a new premium rate and then file it with the state—known as use and file authority.]
  • In 6 states, insurance departments were not authorized to approve or disapprove rate filings in any market.
  • In 1 state, carriers were not required to file rates for approval or disapproval each time the carrier proposed to change premium rates.
  • In the remaining 15 states, authority to approve or disapprove rate filings varied by market. For example, a state insurance department may have prior approval authority in the individual market, but have information only authority in the small-group and large group markets subject to their regulation.

With health insurance premiums rising by 20 percent in 2010, the call for even more regulation is growing.

More information on State regulations is provided below:
Read the rest of this entry »

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Managers of Equality

July 26, 2011 in Economics - General | No comments

“In an egalitarian world, everyone is equal, except perhaps the managers of equality. And certainly in the foreseeable future, there will be endless and not unprofitable work for those whose business it is to spell out in ever greater detail the rules of the game of life, and to adjudicate conflict, and to teach the benighted what thoughts a just society requires. Politics will have died, but everything will be politics.”

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Capitalism vs. Socialism

February 5, 2010 in Economics - General | 3 comments

John Kay offers a European perspective on the debate of between the superiority of a market economy against a centrally planned economy.  Is there empirical evidence that a market economy is superior?  John Kay says yes:

“The fall of the Berlin Wall in November 1989 …marked the end of the most extensive controlled experiment in the history of social sciences – the division of Germany into two economic zones, one centralised and planned, the other a market economy. After forty years, the gap in living standards between the two was so extreme that the experiment was terminated.”

Why is capitalism so successful over the long run?  Kay gives 3 reasons:

  • Prices act as signals; the operation of the price mechanism is a better guide to resource allocation than central planning
  • Markets function as a process of discovery, the chaotic process of experimentation through which a market economy adapts to change…Centralised systems experiment too little. They find reasons why new proposals will fail – and mostly they are right in their suspicions, because most experiments do fail. But market economies thrive on a continued supply of unreasonable optimism.
  • Markets yield benefits from the diffusion of political and economic power… A one sentence description of why some countries are poor and others rich is that the politics and economics of poor countries are dominated by rent-seeking and the politics and economics of rich countries are not.

But isn’t a market economy one motivated solely by greed?  Can a country motivated solely by greed be successful?  According to Kay, “This is the economic environment of Nigeria and Haiti, and it does not work.”  Instead, the greed must be tempered through the mechanisms of trust relationships and reputation.  To get a broader perspective, Kay concludes with the following:

“Markets are not a well-oiled machine: they more closely resemble a constantly changing, adaptive biological system. Pluralism is their motive force, their essence is chaotic, their development inherently uncertain. If we could predict the evolution of markets, we would not need markets in the first place.”

Source: Kay, John (2009) “The Rationale of the Market Economy: A European Perspective,” Capitalism and Society: Vol. 4: Iss. 3, Article 1.

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53% of American adults believe capitalism is better than socialism

April 14, 2009 in Economics - General | No comments

According to Rasmussen Reports:

  • 53% of American adults believe capitalism is better than socialism,
  • 20% believe socialism is better, and
  • 27% are undecided.

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