Let’s assume for a minute that the real culprit in the debate over health care reform is not the insurance companies, but the rising cost of health care. Now, this doesn’t mean I’m willing to let the insurance companies off the hook, as you will see. But, for now, bear with me and assume that the driver of this whole mess is the high cost of health care.

If we make this assumption, a number of things jump out pretty quickly:
There is little, if anything, in the reform bill that will control the cost of health care.
There is nothing in the reform bill that will drive down the cost of health care.
There is nothing in the reform bill that will put a cap on the cost of health care.
Since health care is part of the Free Market Economy, health care providers are going to charge what the market will bear.

If you’re an insurance company, these three things are going to drive your behavior after health care reform as much as they did before health care reform. If you are an insurance company, you are still going to do whatever it takes to pad your bottom line, including but not limited to:

1. Finding new and innovative ways to limit or deny medical procedures to those who need it the most.
2. Finding ways to weasel around being forced to take people with pre-existing conditions by, say, charging them so much for their insurance that they can’t afford to buy it (which then allows Mr. Insurance Company CEO, a.k.a. Satan’s Lackey, to proclaim “We haven’t turned away a single soul who had a pre-existing condition, but we’ve certainly collected a lot of souls as payment for the policies we provided).
3. Selling new and innovative coverage vehicles–similar to what auto insurance companies do–in which you “give the consume a “choice” as to how much coverage they want, at what cost and at what deductible level.

This of course, ignores the obvious as well: Because health care providers are going to charge what the market will bear, insurance companies are going to charge what the market will bear.

So: Uncontrolled Health Care Costs = Uncontrolled Insurance Costs

This is where things get really interesting.

As with the housing market and credit default swaps (and coverage of Michael Jackson on CNN), this can only go on so long. Then things take a real turn for the worse.

Companies that routinely buy group health insurance coverage for their employees are going to have to limit the number of plans employees have to choose from (this is already happening, by the way). These companies are also going to have to ask their employees to contribute more and more toward that insurance (also happening now).

But, there is a tipping point.

Salaries and wages are not keeping up with inflation. Workers (both middle management white collar and blue collar) are already stretched to the limit in terms of how much more they can afford to have appropriated from their paychecks for insurance. At some point, and that point is nearly here, employees will start opting out of insurance coverage because they can’t afford it.

When that happens, companies will have to terminate their group policies because the number of employees participating will no longer make the company’s participation cost effective. So, the company drops the policy which, in turn, causes the insurance company to lose a whole lot of money.

Causing them to raise prices.

Causing more company’s to opt out.

And so on, and so on, and scooby-dooby-dooby.

At this point, the collective bottom lines of the collective insurance companies begin to gush red ink. At the same time, the collective bottom lines of the collective health care providers begin to gush red ink.

Which leads to (Trumpets, please): A FINANCIAL MELTDOWN OF THE HEALTH CARE INDUSTRY!

The only way to reform health care in America is to attack what is driving the health care problem, and that is overall health care costs. Attacking the insurance companies, as much as I hate to say it (and I do hate to say it), is like trying to put more lifeboats on the Titanic before it hits the iceberg instead of steering the ship clear of the iceberg altogether.

If this sounds like doom and gloom, it is. If it sounds familiar, it should. Do I expect this scenario to play out in full? Of course. America has always been a country that would rather face a crisis and react than prevent the crisis altogether. There isn’t anything here that suggests the pattern will be broken.

As George Santayana said: “Those who cannot remember the past are condemned to repeat it.”

© 2009, Mac Williams. All rights reserved.

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