Extortion by any other name

You know that when the Wall Street Journal uses the word “thuggish“, to describe a letter from HHS Secretary Kathleen Sebelius that the contents must be serious. Normally the WSJ prefers terms like “political hard ball” and “aggressive tactics”. We have another more straightforward name for this type of Chicago style politics – extortion.


The Government has heaped a massive amount of regulation onto insurance companies and that has driven their costs up. This fact is understandingly unpopular with the consumers that purchase health insurance, as they were promised that healthcare reform would lower costs. Many consumers and employers are getting a sense of the cost of regulation as their new health insurance premiums rise and insurance companies have been trying to inform their clients why costs are going up so dramatically. That doesn’t sit well with the Don of HHS, Kathleen Sebelius.


Sebelius’s solution to the unpopular fact that government regulation is driving costs up is to threaten insurance companies. If an insurer informs their clients why rate or going up, or raise rates beyond what HHS deems as “reasonable”, they will be punished. Sebelius’s letter says;

It has come to my attention that several health insurer carriers are sending letters to their enrollees falsely blaming premium increases for 2011 on the patient protections in the Affordable Care Act. I urge you to inform your members that there will be zero tolerance for this type of misinformation and unjustified rate increases.


That provides an interesting juxtaposition of to President Obama’s Friday speech where he admits that the administration knew that health care reform would drive up costs. On Friday Obama said “As a consequence of us getting 30 million additional people health care, at the margins that’s going to increase our costs—we knew that.”. Apparently Sebelius didn’t get the memo.


The letter concludes with the reason that insurance companies need to do what Don Sebelius “suggests”.

Already, my Department has provided 46 states with resources to strengthen the review and transparency of proposed premiums. Later this fall, we will issue a regulation that will require state or federal review of all potentially unreasonable rate increases filed by health insurers, with the justification for increases posted publicly for consumers and employers. We will also keep track of insurers with a record of unjustified rate increases: those plans may be excluded from health insurance Exchanges in 2014. Simply stated, we will not stand idly by as insurers blame their premium hikes and increased profits on the requirement that they provide consumers with basic protections.

Let me translate, “Do as we say or we’re going to put you out of business.” Exclusion from the health insurance exchange, combined with state regulator interference can be the death knell for a private health insurer that dare disobeys. The insurance exchanges are designed to foster competition and bring consumers and health insurers together. They will also be the place that many private businesses, by far the largest supplier of non government provided health insurance, shop for their insurance. Exclusion puts any company at risk of loosing a lot of it’s business. The threat of siccing local regulators on any of the uncooperative is a none to veiled threat to end or impede that company’s business in a state wide market.


Sebelius has made it clear that Washington will be picking winners and loosers. Washington will decide how much profit is acceptable, and what speech they will accept. If anything goes wrong the blame will go to the insurers, not the government. Future health care will be highly politicized. This continues a long line of market place interference, and will predictably have the same sad results. The new twist is the overt Chicago style public threats against private companies. Does extortion counts as “Change we can believe in?”


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