Surely ObamaCare is the modern Pandora's box.
Did you realize it actually carries provisions that will more energetically tax, track and regulate your ability to buy gold coins worth $600 or more? (http://miniurl.com/73393.)
What does that have to do with health care -- unless we're talking about the health of the IRS?
Yes, on Monday a federal judge in Virginia declared unconstitutional a key part of the landmark socialized medicine scheme, and rightly so. U.S. District Judge Henry Hudson, a George W. Bush appointee, ruled the federal mandate threatening to fine anyone who refuses to buy health insurance by 2014 is "neither within the letter nor the spirit of the Constitution."
But the statists will appeal.
Meantime, opponents -- still outnumbered in the U.S. Senate, facing a certain White House veto of any repeal and dogged by weak-kneed RINOs in their own camp -- are limited to a guerrilla strategy for now, sniping at the Patient Protection and Affordable Care Act from the bushes. All while, like the clockwork of the German war machine speeding troops to the front in 1914, seemingly beyond human control once started, the provisions of ObamaCare continue to unfold.
In two weeks, for instance, a provision of the PPACA called the "Medical Loss Ratio" will go into effect. It requires that insurance companies pay out 80 percent of insurance premium income as claims and benefits, leaving only 20 percent for marketing, administrative overhead and other costs.
"Twenty percent?!" many who have never run a business will shriek. "That's outrageously high. Surely 5 percent should be enough for overhead!"
But every business is different, and for someone in Washington to impose a one-size-fits-all margin can easily mean disaster, whether accidental or on purpose.
Supermarkets can famously survive by pricing their goods only a few percentage points over cost, because of the velocity at which stuff flies out the door. (Even there, taxes, labor and regulatory costs require a considerably higher margin today than 40 years ago.)
Other businesses -- antique stores come to mind -- see much slower turnover, and thus require higher margins. In a free market, the "fix" for excessive overhead is competition from the lean and hungry. But licensing and mandates actually reduce competition.
To understand just how soon we're going to see a big local impact from the new Medical Loss Ratio, you have to understand that the secretary of Health and Human Services was supposed to issue rules explaining what would be counted as overhead back in June but failed to do so. Thus, many in the industry were stunned on Nov. 20 when those rules finally came out, and they included in the 20 percent maximum overhead ... commissions.
Independent insurance agents -- the human beings who are supposed to intercede on your behalf with the faceless giant insurers -- live on commissions. Generally, insurance companies pay them 15 percent to write new business and 10 percent to maintain established accounts.
I spoke last week with Dan Heffley, a local Las Vegas insurance underwriter who's president of the Clark County Association of Health Underwriters and state legislative chairman of the National Association of Health Underwriters -- though he said he was only speaking for himself, in our conversation.
Mr. Heffley reports that upon learning of the new federal rules, Sierra Health & Life and Health Plan of Nevada, who between them carry the bulk of the health insurance in Nevada, announced they'd be slashing their service commissions on individual plans from 10 to 5 percent as of Jan. 1. (Group plan commissions will also go down, many from 10 to 6 percent, at renewal.)
"So that's 16 years worth of business I've built up that was just cut in half," Mr. Heffley says. "There are going to be layoffs in Nevada. This was going to be my retirement, but now we're collateral damage. We're casualties of war. I had to tell my 12-year-old daughter we're going to be bankrupt after 20 years in this business. I estimate 8,500 jobs are going to be gone."
"At least I don't employ anyone," Mr. Heffley wrote in a follow-up e-mail. "Those agencies that do are already making out the pink slips to their support staff. Just what Nevada needs: more unemployed people."
Large companies typically comply with the 20 percent rule anyway, Mr. Heffley says. The problem is that smaller firms need higher margins, so the effect will be to force out the little guys, leaving only a few giants. That's no accident.
"We're going toward a single-payer system," he says. "The independent agent is going to be gone."
Nevada Commissioner of Insurance Brett Barratt will probably file for a one-year waiver to exempt Nevada from the Medical Loss Ratio rules, Mr. Heffley says. But it can take at least 90 days before the federal Department of Health and Human Services acts on such a request. By spring, he expects the damage to be done.
There are 8,849 licensed resident insurance agents in Nevada, and 38,694 other insurance "producers," all of whom pay a $195 license fee, $125 of which goes into the state general fund, Mr. Heffley reports -- nearly $6 million per year to the general fund in licensing fees alone.
Then, after sales, gaming and payroll taxes, the tax on insurance premiums (why do we tax insurance premiums?) is Nevada's fourth-largest source of general fund revenue, producing $234 million in fiscal year 2010.
In addition, Mr. Heffley estimates the private health insurance business was generating a direct Nevada payroll of $112 million and an indirect payroll of $204 million, as of 2007.
Under ObamaCare, the National Center for Policy Analysis estimates, as many as 700,000 jobs could be lost, nationwide, in the private health insurance industry by 2019. (http://miniurl.com/73404)
Four insurance carriers stopped writing insurance in Nevada as soon as ObamaCare passed, Mr. Heffley reports. Because ObamaCare places new mandates on "child-only" policies, no carriers offer child-only policies anymore.
Gee, that's working well. But again, none of this is an accident. This is precisely what ObamaCare is designed to do: drive the private insurance companies out of the market, so we're left with no choice but to turn to the new government "exchanges."
In the meantime, how many of your neighbors now earn $40,000 to $60,000 per year in the insurance business -- typical wages there? As they lose those jobs, how many will stop patronizing the business where you work? How many more houses will be boarded up?
Meantime, folks in the insurance business are also waiting for the Department of Health and Human Services to define what the ObamaCare law means by "an unreasonable rate increase." The bureaucrats are supposed to issue that rule by the fall of 2011.
As one local agent recently blogged, "How nice of them."
Vin Suprynowicz is assistant editorial page editor of the Review-Journal, and author of "The Black Arrow." See www.vinsuprynowicz.com.