"In his Wednesday speech, President Obama fired up the troops on the urgency of reducing the number of uninsured in this country and achieving universal coverage via insurance regulations and forcing all Americans to buy insurance.
Under his plan, insurers would be faced with "guaranteed issue" and "community rating." In other words, they wouldn't be allowed to deny insurance based on a pre-existing condition, take coverage away in the middle of a treatment, set a premium based on one's medical history or set lifetime caps on coverage.
If there were a "guaranteed issue" law for fire insurance, no one would buy coverage unless his or her home was actually on fire. We'd see the same "negative selection" under the Obama plan: Lots of people would simply avoid buying insurance until they got sick. After all, if you can't be turned down when you are sick, why bother wasting money on insurance when you don't need it?
Sick patients cost more, of course. Insurance premiums would gradually get more and more expensive, because the only people in the insurance pool would be ill.
Community rating would have a similar impact, because insurers would be forced to charge the same prices to the sick and the healthy, to smokers and non-smokers, and to the obese and those who are fit.
Such measures guarantee that all customers will end up paying higher prices. The average state-level mandate for community rating hikes premiums by over 10 percent. The average guaranteed-issue ordinance drives up premiums a whopping 227 percent.
This has proved to be the case in the states of New York and New Jersey -- which have the highest insurance rates in the nation. As a result, the young and healthy forgo purchasing insurance because it is a bad deal for them as they have few assets and are not likely to face a catastrophic illness."
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