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Once we accept

likely if insurers outside the pools are prohib-

lation of the health care industry and political

ited from offering lower premiums, as recom-

interference in personal health care decisions.

the principle

mended by the New America Foundation.49 In

The result will be a slow but steady spiral

that it is the

downward toward a government-run national

the end, the pools will become monopsony

government's

health care system.

purchasers of health insurance, turning insur-

To see this in action, one has only to look at

ers into little more than public utilities.

responsibility to

the details of the comprehensive proposals

These proposals for regulating the insur-

ensure that every

containing individual mandates. For example,

ance market should not be seen as indepen-

the New America Foundation would require

dent from the individual mandate; they are a

American has

insurers to accept all comers without any wait-

direct outgrowth of it. "If you want to go

health insurance,

ing period for preexisting conditions. The

down the road of an individual mandate, it's

we guarantee even

foundation also embraces community rating

necessary to reform the entire health insur-

(a prohibition on charging different premi-

ance system to make sure healthy people can

more government

ums based on factors such as age, sex, occupa-

get affordable coverage and sick people are not

involvement with

tion, or health status) and would prohibit any

priced out of the market," says Gail Shearer of

risk rating of premiums.46

Consumers Union.50 And because the man-

and control over

date restricts the ability of the market to disci-

The New America Foundation also calls for

large portions of

pline itself, increased regulation will be seen as

the creation of "community purchasing pools"

our health care

the only way to meet that goal.

that would provide government-approved

In addition, we have already seen that there

insurance plans to individuals on a collective

system.

basis.47 Governor Romney's plan also calls for

will be enormous special interest pressure to

add benefits to the mandated package. As more

such pools, which were once a key ingredient of

the Clinton health care plan.48 (Massachusetts

benefits are added, the cost of the mandate will

increase. That will place legislators in a very dif-

already has community rating.)

ficult position. If they increase subsidies to keep

The pools would not actually be insurers.

pace with the rising cost of the mandate, the

Insurance would still be provided by the pri-

cost of the program will explode. On the other

vate sector. Rather, the pools would function as

hand, if they hold subsidies steady, the

clearinghouses, a sort of wholesaler or middle-

increased cost will be borne by consumers, who

man, matching customers with "approved"

will have no choice but to continue purchasing

providers and products. They would also allow

the ever more expensive insurance. Since con-

small businesses and individuals to pool their

sumers would have little or no leverage over

resources to take advantage of the economies

insurers (they can no longer refuse to buy their

of scale available to large group plans.

products), they can eventually be expected to

However, when such pools are combined

turn to the only entity that can hold down their

with community rating and restrictions on

costs--the government. Attempts to scale back

other types of risk rating, they can act as sig-

benefits would certainly meet political opposi-

nificant barriers to competition in the insur-

tion from powerful constituencies and com-

ance industry. Since plans participating in

plaints about "cuts." The only other alternative

the pools must offer the same package of

would be for the government to intervene

core benefits, they can compete on the basis

directly by capping premiums.

of services offered only at the margins. Price

To see this dynamic in action, just look at

competition is also extremely limited since so

the recent Bush administration budget pro-

many of those purchasing from the pools

posals for Medicare. Faced with exploding

have their purchase costs subsidized. And the

program costs as a result of the president's

inability of insurers to reduce costs by man-

prescription drug program, the administra-

aging risks will act as a further barrier to price

tion has reacted, not by cutting back on ben-

competition.

efits, but by cutting back on payments to

Ultimately, the pools will squeeze out

providers, de facto price controls.51

insurers outside the pools. That is particularly

8