Blue Cross Rate Hike: Symptom, Not Cause

There has recently been a great deal of consternation and concern over the rate increase enacted by Blue Cross Blue Shield New Mexico (BCBS). The company, a “mutual” firm which is legally obligated to re-invest any profits back into the company, had originally requested a 24.6 percent rate increase. Then, just as the Public Regulation Commission (PRC) was holding public hearings on the issue, an agreement was reached that allowed Blue Cross to raise rates by 21 percent this year. Approval of the rate hike, absent public input, generated a public outcry.

But I believe that anger at Blue Cross is misplaced. It is our political leaders in Washington and Santa Fe, who have gotten us into this mess and, given the recently-signed health care law in Washington, are continuing to make the situation worse. The problem we face in New Mexico (and nationwide) is the rapid rise in health care costs. The truly unfortunate thing is that Washington’s “reform” bill will do nothing to mitigate this problem and is actually designed to make the situation worse.

Notably, the rate hike agreement applies to individual plans, but not group plans. I happen to own an individual health savings account plan and will be among the 40,000 New Mexicans impacted under this rate hike (this is a much smaller group than the 825,000 adults aged 18-64 who are insured in some form of group plan in New Mexico).

As a result of the PRC decision, my insurance costs will rise despite the fact that health savings accounts like mine actually reduce health care costs. In Indiana, for example, the state government has given government workers a health savings account option. Participants in the new plan ran up only $65 in cost for every $100 incurred by their associates under the old coverage.

Not only are these “consumer-driven” plans not encouraged in the health care bill, the new law is actually going to make consumer-driven plans like my health savings account less attractive through additional, onerous rules and regulations.

Consumer-driven plans are just one possible solution, however. In a competitive health care market, there would be no need for the PRC to hold hearings on rate hikes, nor there a need for government-enforced transparency. Take the car insurance marketplace, for example. There are dozens of companies competing to provide New Mexicans with the best, lowest cost car insurance. Why is that? The single biggest difference is that car owners pay for their insurance and they have incentives to both shop around and not over-use their insurance.

What can be done? The simple fact is that at this point, if we want to control health care costs, we need to rely on the courts to abandon ObamaCare. This is a real possibility as the federal government has never forced Americans to purchase any product in the past, so there are real Constitutional questions here.

Obama’s health care plan is doomed to fail because, by mandating that individuals purchase health insurance, it only reinforces the third-party payment system and further reduces incentives for people to be responsible and care what they spend on health care.

But the federal health care plan will do little or nothing to cut through any of the other rules and regulations (like coverage mandates, licensing, or liability laws) that have caused prices to rise so rapidly in recent years. An analysis by the Health and Human Services Department stated that “the overhaul will increase national health care spending from 2010-2019.” So, as bad as this 21 percent hike looks now, don’t look for the situation to get any better. In fact, more massive price hikes are on their way under ObamaCare.

To make health care more accessible and less costly, we have a competitive, mostly market-based model to follow in car insurance, but Congress is taking us in the opposite, more heavily-regulated direction that locks in the third-party-payer model that caused these rate increases in the first place. Now, more than ever, we need change, but the change we need is to empower individuals to pay for and wisely use limited health care resources.

Paul Gessing is the President of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.