Tag: consumer protections

This Would Raise the Price of Cell Phone Service

You’d think consumers didn’t care about price.

This HuffPo piece makes the wireless industry’s resistance to regulation requiring backup power at cell sites sound all “corporate-y.”

“The biggest issue is they have not wanted to invest the money in hardening their networks sufficiently against a catastrophic event,” says Harold Feld, senior vice president at Public Knowledge.

Industry group CTIA says the proposed requirements “would unnecessarily burden wireless carriers and potentially undermine the investments and network planning that have made their networks so successful.”

What about the fact that the cost of backup power requirements would be passed on to consumers in the form of higher prices?

The case for a backup power regulatory mandate sounds weak. During the biggest storm in who-knows-when, in the most populous regions of the country, “thousands” were left without cell phone service. What percentage of the New York-New Jersey metropolitan area’s population is that?

“As power returned to many areas over the weekend, wireless carriers reported that more than 95 percent of their cell towers in areas affected by the storm were working.”

Lost service is a real thing that happened, but other dimensions of preparedness and response seem to have gone much worse.

To the extent lost service had a proximate relationship to someone not getting the help they needed, Superstorm Sandy makes clear the consequences of large weather events, and it will educate consumers and cell phone providers both about the risk of lost communications during natural disasters. Both will respond as they see fit.

But raise everybody’s cell phone bill permanently to secure against outlier events? Let’s put our thinking caps on:

Given the increased cost, marginal cell phone consumers would drop their service and they wouldn’t have access to communications when they were in emergency situations.

It seems to me that getting a cheaper cell phone plan to people who may often have occasion to report muggings-in-progress is a greater protection for the public than insuring the wealthier consumer against lost service during extremely rare weather events.

How ObamaCare Is Destroying Consumer Protections

In this morning’s Charlotte Observer, I explain how ObamaCare is destroying consumer protections.  Exhibit A is Blue Cross Blue Shield of North Carolina’s decision to refund $156 million to its policyholders:

BCBSNC’s refunds show that ObamaCare is leaving seriously ill patients with less protection, not more. Health insurance was hardly perfect before ObamaCare, but BCBSNC’s policyholders had insurance that had pre-funded many of their future medical bills.

Now, ObamaCare has effectively transferred those reserves from the sick to the healthy. Seriously ill policyholders now have less protection against BCBSNC reneging on its commitments to them. Competition used to discourage skimping; ObamaCare rewards it.

Due to space considerations, the editors dropped the parts where I explain (A) how research by Harvard economist (and sometime Obama advisor) David Cutler shows that under ObamaCare’s price controls, insurers must compete to avoid the sick, and (B) that ObamaCare is blocking further innovations – such as those foreseen by University of Chicago economist John Cochrane – that would provide even greater protection to the sick.

ObamaCare Leads Minnesota Insurers to Suspend Sales

From the Minneapolis Star-Tribune:

Two of Minnesota’s biggest health plans said Thursday they have temporarily suspended sales of individual health insurance policies because of uncertainty related to the new federal health reform law.

The moves by Blue Cross and Blue Shield of Minnesota and HealthPartners came on the same day some of the federal government’s most-heralded consumer protections came into effect…

The insurers that have suspended individual sales say they are awaiting guidance on new rules, including those around coverage of kids with pre-existing conditions…

Pam Lux, a spokeswoman for Eagan-based Blue Cross, said she expects the suspension of individual sales to be brief but could not say if it would be days or weeks.

Many Supporters Not Willing to Trumpet ObamaCare’s Achievements

An interesting update on the politics of ObamaCare appears in CongressDailyPM (subscription required):

The marking of six months since the signing of the healthcare law should be a moment of celebration by Democrats, especially as several popular provisions go into effect today. But the political realities of the midterm elections have made trumpeting the law, which remains unpopular with large swaths of the electorate, a delicate balancing act for Democrats…

House leaders tell their members to address the healthcare law in a way that best suits their districts…

some Democratic members in the House and Senate instruct staff not to write talking points on the law’s six-month provisions…

a former administration official questions if Democrats’ efforts to sell the bill are making any significant headway…

It’s little wonder, really.

But still.  Wow.

ObamaCare’s First Adverse-Selection Death Spiral

This is what happens when government price controls limit insurance companies’ ability to set premiums according to risk:

Note that this adverse-selection death spiral happened before ObamaCare’s price controls on child-only coverage even took effect.  (Of course, President Obama never calls them price controls.  He calls them “consumer protections.”  Some protection.)

ObamaCare supporters are in full-blown denial:

“We’re just days away from a new era when insurance companies must stop denying coverage to kids just because they are sick, and now some of the biggest changed their minds,” Ethan Rome, executive director of Health Care for America Now, an advocacy group, said in a statement. “[It] is immoral, and to blame their appalling behavior on the new law is patently dishonest.”

I’d say that brave new world is already here.

ObamaCare supporters can take comfort in this: since it might take healthy people a while to figure out that they’re better off financially if they drop their coverage and pay the individual-mandate penalty, ObamaCare’s health insurance exchanges might not collapse before their January 1, 2014, launch date.  They could last until January 2.

Administration Reform Plan Misses the Mark

The Obama Administration is presenting a misguided, ill-informed remake of our financial regulatory system that will likely increase the frequency and severity of future financial crises. While our financial system, particularly our mortgage finance system, is broken, the Obama plan ignores the real flaws in our current structure, instead focusing on convenient targets.

Shockingly, the Obama plan makes no mention of those institutions at the very heart of the mortgage market meltdown – Fannie Mae and Freddie Mac. These two entities were the single largest source of liquidity for the subprime market during its height. In all likelihood, their ultimate cost to the taxpayer will exceed that of TARP, once TARP repayments have begun. Any reform plan that leaves out Fannie and Freddie does not merit being taken seriously.

Instead of addressing our destructive federal policies aimed at extending homeownership to households that cannot sustain it, the Obama plan calls for increased “consumer protections” in the mortgage industry. Sadly, the Administration misses the basic fact that the most important mortgage characteristic that is determinate of mortgage default is the borrower’s equity. However, such recognition would also require admitting that the government’s own programs, such as the Federal Housing Administration, have been at the forefront of pushing unsustainable mortgage lending.

While the Administration plan recognizes the failure of the credit rating agencies, it appears to misunderstand the source of that failure: the rating agencies’ government-created monopoly. Additional disclosure will not solve that problem. What is needed is an end to the exclusive government privileges that have been granted to the rating agencies. In addition, financial regulators should end the outsourcing of their own due diligence to the rating agencies.

The Administration’s inability to admit the failures of government regulation will only guarantee that the next failures will be even bigger than the current ones.