The biggest recent development in the health care reform follies is not the widely touted “breakthrough” in negotiations between Blue Dogs and the Democratic leadership in the House. It is the Obama administration’s little-reported decision not to regulate—or even try to regulate—the insurance industry. Instead, the White House is proposing another timid and toothless approach to overseeing a rapacious private industry.
Regulation of the insurance industry has for a century been left to the states, which have made a pretty shoddy job of it. Current proponents of federal regulation have pointed to the expanded role the industry plays in the financial sector as a whole, and to the fact that insurance giant AIG helped bring down the U.S. economy, and cost taypayers billions in bailout funds. A story on Politico quoted Congressman Ed Royce of California, the original Republican co-sponsor of a bill to create a federal insurance watchdog: “Never has the federal government been so invested in an industry it has no regulatory authority over,” Royce said. Leaving the business of insurance regulation solely to the various state insurance commissioners, while the federal government taxpayer-funded assistance, is simply irresponsible.”
The House bill, introduced in April by Illinois Democrat Melissa Bean, is pretty weak stuff in itself. But it’s still too much for the White House, which has an even more half-assed solution in mind. As Politico reports:
The White House has stopped short of pushing for the creation of a federal regulator for insurance. Draft legislation that the administration sent to Capitol Hill last week instead called for the establishment of an Office of National Insurance in the Treasury Department, which would monitor “all aspects of the insurance industry” and identify regulatory gaps that could lead to another crisis. But the new office would not have the power to make or enforce rules on insurers.
Obama’s plan is getting a boost from Senate Banking Committee Chair Chris Dodd, who on Tuesday convened an “expert panel of witnesses to testify on regulatory modernization and the insurance industry.” In his mealy mouthed opening statement, Dodd played things right down the middle, saying “there is a solid case to be made that state-based regulation of insurance has worked for more than a century,” but “there is also a case to be made that it’s time for a change.” He all but endorsed Obama’s feeble plan for a powerless Office of National Insurance, and included a couple of valentine’s to the insurance industry, which he said “provides millions of Americans in our country with the safety net they need, whether they be individual homeowners, small businesses or larger enterprises.” Dodd went on:
We live in an uncertain world. The economic crisis has claimed as casualties millions of Americans who have lost jobs, homes, retirement savings, and their families’ economic security.
But even in the best of times, there is always risk. And that’s why the insurance industry exists – to provide stability to families and businesses.
Dodd forgot to mention the fact that the insurance industry helped to create the aforementioned economic crisis—which is just about what you would expect from a senator from Connecticut, as state that long served as a home to big insurance companies. In fact, Chris Dodd and before him his father, Senator Tom Dodd, have always been viewed as gatekeepers who got millions in campaign contributions in return for keeping the Congress’s hands off the business. As a recipient of insurance industry campaign contributions over the last 20 years, Dodd ranks second only to John McCain among current members of Congress.
The damage done by insurance companies doesn’t stop with the financial collapse. They are also major stumbling block to a decent, affordable national health care plan—perhaps even more so than Big Pharma. The drug companies at least make a useful product (even if in the process they manipulate, gouge, and generally screw the public in every way they can think of). The insurance companies, on the other hand, play no positive role whatsoever in the provision of health care. They are useless, bloodsucking middlemen whose share of the health care pie is money wasted, pure and simple.
In addition to bilking the public directly, the insurance industry bilks taypayers by securing sweetheart deals from the government: Medicare’s Part D drug program is funded largely by the federal government, but run through insurance companies who take their substantial rake-off. That was the only way Bush and the Republicans, then a majority in Congress, would agree to put through a Medicare drug benefit—as an essentially privatized operation (unlike the single-payer-style original Medicare system). In fact, Medicare Part D has been a boon to the insurance and pharmaceutical companies alike, channeling more government funds into their bulging pockets.
Anyone who hoped for better things under the Democrats now appears to have their retort: The White House, along with the insurance industry’s friends in Congress, will do nothing to meaningfully curb the industry’s power through federal regulation. And the current health care “reform,” in its final construction, is likely to give a taxpayer-funded boost to health insurance companies in the form of mandates and government subsidies to buy private insurance. That’s why the industry will ultimately sign on.
In fact, it’s possible we may soon learn that the two developments are connected—that the concessions on federal regulation of the insurance industry were a trade-off for the industry’s agreement not to block health reform on the Hill. In which case, it’s a win-win for big insurance, once again.