Obamacare supported by insurance companies

One of the really incorrect things you see in the debate on Obamacare is the lefties' kneejerk assumption that if something is big government, it must be anti big-corporation. So many lefties hate and mistrust capitalism and they associate big companies with capitalism that it is not even a questioned thing in those circles. However, one thread I've been learning the importance of over the last year or two is that there is a huge difference between "big corporations" in a truly capitalist society, vs big corporations in our current setup. In our current setup, we have what is sometimes called "crony capitalism" which, unfortunately, is not capitalism at all, or is certainly not "free markets". I've made this mistake myself for a long time as well, often defending large corporations as if they must be little valleys of true capitalism/free-markets instead of realizing that in our current setting, they are often egregious products of crony-capitalism.

Crony capitalism quite simply is corporations that use the non free-market power of government to their advantage, thus doing decidedly non free-market things. A classic example are laws for regulating companies: often these are pushed by the biggest companies in that industry because they are large enough to afford the cost of regulation while it greatly increases the barrier to entry of small competitors, effectively providing them protection. Of course, direct subsidies and tariff protection are too extremely obvious cases as well.

In either case, one of the illusions going around about Obamacare is that this is a way for the left and the US population to stick it to insurance companies, and that this is essentially the people vs the insurance companies. Explicit in that is the notion that the insurance companies must be fighting Obamacare.

In fact, though, they are *supporting* Obamacare, in a classic piece of crony capitalism. As Reason writes:

"We allow the insurance industry to run wild in this country," President Obama declared on Monday. "We can't have a system that works better for the insurance companies than it does for the American people."

Yet Obama's plan to tame health insurers would boost their business, protect them from competition, and guarantee their profits, all at the expense of consumers and taxpayers. It is therefore not surprising that the insurance companies, while they object to the president’s rhetoric and quibble over some of the details, are happy to be domesticated. Here are five ways in which Obama would help insurers while pretending to fight them:

The individual mandate. What industry wouldn't welcome a law requiring everyone in the country to purchase its product? The insurers' only objection to this edict—which would force young, healthy people who don’t want insurance to subsidize the care of older, sicker people who do—is that the penalties for failing to comply are not severe enough.

The employer mandate. Requiring businesses to buy medical coverage for their employees brings the insurers more conscripted customers. It also shores up a perverse system of employer-provided health insurance that insulates consumers from prices, limits their choices, and weakens competition.

Subsidies. Allocating taxpayer money to help individuals and small business buy medical coverage makes customers less price-sensitive, allowing insurers to charge more than they otherwise could.

Regulations. Obama wants to dictate the details of what he considers to be minimally acceptable medical coverage, including the size of deductibles and the extent of benefits. This policy, which forces people to buy pricier policies than they would choose on their own, is like decreeing that all Americans should buy a Nissan Altima with GPS, a sunroof, and leather seats, even if they would prefer a Hyundai Accent.

Limits on competition. Obama pays lip service to the idea of letting health insurers, like other insurers, compete for customers across state lines. But his minimum coverage requirements would undermine a major benefit of such competition: the ability to escape a particular state's restrictions on the policies insurers can offer.

If Obama's plan works as advertised, it will be a huge boon to insurers. As he himself notes, "they're going to have 30 million new customers" thanks to the government's mandates and subsidies.