The horrors! The horrors! Why the WSJ hates the health care bill. HATES, HATES,

[pnwmom]

HATES. Sounds good to me.

http://online.wsj.com/article/SB10001424052748704304504574610040924143158.html?mod=googlenews_wsj

As Harry Reid's 2,000 page health-care bill is being rammed through the Senate, most of the public debate has been directed to its expanded coverage, its now defunct public option and its high taxes. Lost in the shuffle has been its intensely coercive requirements on health insurance issuers, especially in the individual and small group markets. Taken together, these restrictions are likely to drive them out of business and run afoul of the constitutional guarantee that all regulated industries have to a reasonable, risk-adjusted, rate of return on their invested capital.

The perils of the Reid bill are made evident in a recent Congressional Budget Office (CBO) report that focused on the bill's rebate program, which holds that once an insurance company spends more than 10% of its revenues on administrative expenses, its customers are entitled to an indefinite statutory rebate determined by state regulatory authorities subject to oversight by the Secretary of Health and Human Services. Defining these administrative costs is a royal headache, but everyone agrees that they are heaviest in the small group and individual markets, where they typically range between 25% and 30%, without the new regulatory hassles.

The CBO concluded that this one restriction turned the Reid bill into "an essentially governmental program." In other words, the targeted health insurers would become de facto public utilities whose profits are gutted when the huge compliance costs under the Reid bill are piled on top of the hefty costs inherent in running a labor intensive health-care insurance business.

Worse still, the statutory rebate is only the tip of a larger regulatory iceberg that permeates the bill. Normally, insurers have the power to underwrite—to choose their line of business, to select and to price risks, and to decline unattractive risks. Not under the Reid bill. In its frantic effort to expand coverage to the uninsured, the bill will create state health-care exchanges supported by generous federal subsidies to unspecified millions of needy and low-income individuals. Any health insurance carrier that steers clear of these exchanges cannot keep its customers. Any insurance carrier that enters Mr. Reid's inferno will lose its financial shirt.

Here are some reasons why. Initially, all insurers have to take all comers and to renew all policies except for nonpayment of premiums. Insurers are not allowed to take into account differential risks based on pre-existing conditions. And the premium differentials based on such matters as age and tobacco use are smaller than the market spreads. If too many customers demand coverage from a given insurer to insure efficiently, it's the government that will decide how many they have to keep and who they are.

Next, it's the government that requires extensive coverage including "ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance abuse disorder services, prescription drugs, rehabilitative and habilitative services and devices, laboratory services, preventive and wellness services and chronic disease management, pediatric services, including oral and vision care." The price squeeze gets even tighter because in every required area of care a collection of government standards will help set the minimum level of required services.

SNIP

[HuckleB]

1. So WSJ doesn't like a bill that aims to bring down administrative costs.

Poor Rupert. He does love a big bureaucracy.

[The Velveteen Ocelot]

2. If the Wall Street Urinal hates it,

claiming that it's an Evil Gummint Takeover of good, decent, hardworking American insurance companies, then maybe it's not as bad as we think.

:rofl:

[pnwmom]

4. The enemy of your enemy could be your friend.

:rofl:

[SOCALS]

5. Or maybe it is just part of the charade.

Maybe it was corporations that played chess here after all

[The Velveteen Ocelot]

10. No, I don't think so. They spent way too much money lobbying against it.

As lame as the Senate bill is, it does something that the insurance industry totally hates and has never had to deal with before: For the first time ever, they will be regulated at the federal level. Not nearly enough, but up to now there has been virtually no regulation at all of insurance companies. And now there will be -- just a little toe in the door, but now there's the precedent. Although many progressives are disappointed with the bill because it doesn't regulate enough, the insurance companies are unhappy because regulates them just a little, which for them is too much. So to the extent they and the Republicans and the WSJ are unhappy, then I can be at least a bit happy.

[Ignis]

24. This is a point some haven't considered.

And it certainly contributes (heh, get it?) to why their lapdog Republican congress-critters also hate it.

[SOCALS]

27. Maybe these lobbyists just

try to use this opportunity to make themselves look useful for the corporations and justify their commissions. The more noise they create, the more commissions they get

[The Velveteen Ocelot]

31. Lobbyists don't work on commission; they work on a retainer basis.

And lobbyists who don't get results don't get rehired. So I really doubt this is just a lot of meaningless noise by lobbyists.

[SOCALS]

43. I guess insurance company

lobbyists have demonstrated their necessity and effectiveness in the process

[malaise]

9. +1

:evilgrin:

[silverweb]

3. Wait... what?

I thought insurance company stocks were going up because of the HCR? Shouldn't the WSJ love that?

Never mind. I don't care what that rag says, anyway. It just seems really contradictory.

[HuckleB]

7. How is it contradictory for the WSJ?

[silverweb]

11. Don't they like it when stocks go up?

That's what I've been hearing all week, so I would think they'd be happy.

I don't read the WSJ and I don't follow the stock market and I don't pay more than superficial attention to high finance, so I'm certainly no expert.

Maybe you can clarify it, but here's what I'd expect from the WSJ's viewpoint:

Stocks up = Good.

HCR passing = Stocks up.

Therefore, HCR passing = Good... so I'd think. But apparently not.

:shrug:

[HuckleB]

12. So your only basis for saying that is the current stock prices?

It's dangerous to come to conclusions based on a very small part of a very big picture.

[silverweb]

15. I was asking, not concluding.

Hence the question marks.

But like I said in the beginning, I really don't care, so don't worry about it. It just struck me as odd.

[HuckleB]

16. It's not odd at all.

There's nothing odd about it, so why say it's odd?

[silverweb]

21. It's okay.

Forget about it.

Velveteen Ocelot gave me a helpful answer that I'd never have thought of on my own, so I have no more questions at this time.

[phasma ex machina]

23. Machiavellian machination master Murdoch plays the masses.

Subjected edited due to OP misrepresentation.

[The Velveteen Ocelot]

14. Stock prices don't rise because investors want to buy into a company for the long term.

At least, not any more. Big investors, like hedge funds and mutual funds, buy stock because they can make money on short-term transactions, not because they think a company will prosper in future years. And the one big thing that causes the big investors to avoid buying certain stocks is uncertainty. Now that they know more or less what the shape of HCR legislation will be, they can trade in insurance company stocks believing that the relatively near future will be stable -- not necessarily that the companies will become more valuable over the long term. These guys make the big money on trades, not on share values.

[silverweb]

17. Now that makes some sense.

Thank you. :)

[HuckleB]

20. Yup.

[rollingrock]

25. The OP is pulling a fast one

Its an opinion piece sent in by a READER, not written by the WSJ. note at the top of the article it says OPINION. it doesn't represent the views of the WSJ.


—Mr. Epstein is a professor of law at the University of Chicago and a senior fellow at the Hoover Institution. This article is based on a longer study released by the Manhattan Institute at www.medicalprogresstoday.com.

[The Velveteen Ocelot]

29. Epstein is a regular contributor to the WSJ.

And if you look up his bio, you'll see that he's just a bit to the right of Darth Vader. Here's another example of his contributions to the Urinal: an article about why he thinks the Employee Free Choice Act is unconstitutional -- http://online.wsj.com/article/SB122964977342320545.html

[HuckleB]

33. Do you think the WSJ editorial board supports the current HCR legislation?

[pnwmom]

34. It's an opinion in accord with other WSJ opinions.

The conservative paper is as opposed to the new regulations as Epstein.

[BeFree]

6. So

Only a few big suppliers get to stay in business?

Certainly that would mean that government control would be easier. It's always easier to control one than it is two, or three different orgs.

It is pretty much the way all big businesses have been formed. Regulation compresses the little guys into one solid mass.

Since costs absolutely must be controlled, it looks like the dems have managed to compress the business end down into a manageable size.

[Cetacea]

8. "An essentially governmental program."

This is true.

[BeFree]

18. True? Isn't that what we wanted?

Isn't governmental control over the insurers what we need and wanted?

[spanone]

13. wall street urinal = rupert murdoch...say no more

[EFerrari]

19. Does anyone pay attention to the WaHo anymore? Really?

[rollingrock]

22. This is just the opinion of one READER

it does not the represent the views of the WSJ.

The author of this opinion piece is a professor at the University of Chicago. he does NOT work for the Wall Street Journal.

[The Velveteen Ocelot]

28. The University of Chicago...

Home of Milton Friedman and the rest of the "free-market" douchebags that brought us monetarism, Reaganomics and the eventual collapse of the banking system.

[rollingrock]

30. The opinion section

represents the views of the readers, not the WSJ.

[The Velveteen Ocelot]

32. So you think the WSJ is a bastion of liberal thought and this Epstein guy

is just pulling this crap out of his own personal ass? Get a clue: The Urinal doesn't publish liberal opinion pieces. As I mentioned elsewhere on this thread: Epstein is a regular contributor, and about as wingnutty as the rest of WSJ's op-ed writers.

[rollingrock]

37. Epstein does not represent the WSJ

his is nothing but the opinion of one person. Do you honestly think the WSJ is against this bill at a time when health insurance stocks are going through the roof??

Please...don't kid yourself.



...since Oct. 27, 2009:

* Coventry Health Care, Inc. is up 31.6 percent;
* CIGNA Corp. is up 29.1 percent;
* Aetna Inc. is up 27.1 percent;
* WellPoint, Inc. is up 26.6 percent;
* UnitedHealth Group Inc. is up 20.5 percent;
* And Humana Inc. is up 13.6 percent.



Investors flock to health insurance stocks

www.huffingtonpost.com/2009/12/21/seeing-public-subsidy-not_n_399733.html

[The Velveteen Ocelot]

39. See my post #14.

The increase in health insurance share prices reflects a perception of stability now that the likely outcome of HCR is known. Big investors like hedge funds don't invest in companies because they think they will do well in years to come, but because they can anticipate short term returns. They make money on the trades, not on the corporation's value.

And you damn betcha the WSJ hates this bill -- because it means government regulation of an industry that has never been regulated before. We dislike the bill because we don't think it goes far enough, but conservatives hate it because it involves some regulation of a formerly unregulated business. Watch the WSJ for future editorials. I can just about guarantee that their editorial board will come down on the same side as Epstein, opposing the legislation, and for the same reasons.

[rollingrock]

41. Regardless of what the WSJ may think or not think

One thing is perfectly clear:

the health insurance industry is absolutely, head over heels in love with this bill!

"All in all, relative to the last version of health reform issued by the Senate, things have turned out pretty well for the health insurance industry," said Carl McDonald, an analyst at Oppenheimer. "In particular, all versions of a government-run health plan have largely been eliminated."

[pnwmom]

35. The WSJ chose to highlight the opinion of this reader for a reason.

It accords with the views of the editors.

[2 Much Tribulation]

26. STOCK MARKET L-O-O-V-E-E-S this bill. WSJ writer keeping Party Noise Level down (so no trouble)

[pnwmom]

36. The stock market loves it today. They see an opportunity to make a quick gain

since many people think this will be good for the insurers. That doesn't mean the stock market won't reverse as soon as the insurers start complaining about their declining profits.

[depakid]

38. "declining profits." LOL!

This is a virtual guarantee for rising profits and exceptional growth for years to come- no matter what happens to other sectors of the eoonomy!

[pnwmom]

42. Not according to the U Chicago economist who wrote the opinion article. n//t

[The Velveteen Ocelot]

40. Bingo.

What seems to be missed in this discussion is the fact that the big investors make their money on trades, not on long-term growth. There will be short-term profits based on the perception of stability in the industry, but I would not buy insurance company stock for long-term profit.