Home > Health Care Policy, Obamacare, Price Controls, Uncategorized > The Obamacare Exchanges Open for Business

The Obamacare Exchanges Open for Business

Today is the day that the Obamacare insurance exchanges will open. Finally there will be an opportunity to fully understand what works and doesn’t work in these exchanges because information has been scarce about the workings of these web sites. The President has referred to “glitches” that will be present in these web sites, suggesting that the problems will be temporary. But there are indications that there are serious problems with these web sites that are anything but temporary. ObamaCare’s_Technology_Mess is one article discussing the difficulties implementing what are very complex IT projects.

In addition, there is now evidence that many insurance companies will not join these exchanges, apparently deciding to wait to see how they work before they commit to participation. This article describes how some firms are not offering policies on the exchanges (the article also describes how people will lose their existing insurance because of Obamacare) but it also reveals something else which I suspected would also be true about the exchanges. The policies sold on these web sites will be subject to price controls.

I have seen press reports about the price controls in Massachusetts, the state which is the template for Obamacare. When insurance companies lose money on the health insurance exchanges, they will petition for price increases which must be approved by politicians. If those increases are denied for political reasons, lawsuits result and so the health insurance system degenerates into yet another lawyer relief act. These price controls can ultimately destroy the exchanges by driving away all insurance companies if these companies cannot make a profit due to price controls.

These design flaws, as well as the others discussed in earlier posts on this blog, simply reaffirm my view that Obanacare will turn out to be a monument to the folly of central planning.

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Economics One

A blog by John B. Taylor

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One economist's views on economic policy.

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