Are ObamaCare’s Community‐​Rating Regulations a System of Price Controls?

ObamaCare’s community‐​rating regulations generally bar insurance companies from using any factor other than age to determine premiums, and prevent insurers from charging 64‐​year‐​olds more than three times what they charge 18‐​year‐​olds. I have long maintained community rating is nothing more than a system of government price controls, and should meet with the usual scorn economists universally heap on such boneheaded policies.


An esteemed colleague challenges my claim that ObamaCare’s community‐​rating is a system of price controls, because “the government doesn’t set a price.” Here is how I responded:

Price controls don’t always take the form of a fixed integer. Sometimes government sets prices using ratios.


Premium caps control prices by limiting this year’s premium to a ratio of last year’s premium. Medicaid’s prescription‐​drug price controls set prices as a ratio of the average wholesale price. Medicare’s price controls involve all sorts of complex ratios.


ObamaCare’s community‐​rating regulations control prices by (a) setting the ratio of premiums for healthy vs. sick people within each age category to 1:1, and (b) setting the ratio of premiums for young vs. old to 1:3. Insurers would not voluntarily follow those ratios, with good reason. But community rating forces insurers to set prices according to those ratios. Thus it is a price‐​control scheme.