Don’t bail out Big Insurance in coronavirus legislation

Millions of people have found a simultaneously grim yet welcome surprise in their mailboxes of late: rebate checks from their car insurance companies which find themselves paying out far fewer claims as a result of COVID-19 “stay at home” orders. While modest, these premium givebacks are, of course, welcome at a time of economic uncertainty.

Unfortunately, people have no such luck with their health insurance premiums. Despite paying these in full, access to healthcare is restricted. Elective surgical procedures and in-person doctor visits are mostly canceled except in emergencies. Insurance companies are certainly having to pay for coronavirus-related claims, but it’s hard to imagine them paying for much else right now outside of babies and heart attacks. That isn’t the fault of Big Insurance, but it’s certainly to their benefit.

We can add this windfall to several others the health insurance industry has enjoyed in recent years. Last month, the Supreme Court ruled that Big Insurance was owed $ 12 billion under Obamacare. Insurance company lobbyists at the state level have successfully blocked Trump administration attempts to give people lower-cost alternatives to high-premium Obamacare plans. We all remember the famous “thumbs down” from the late Sen. John McCain, which effectively ended the Obamacare repeal movement.

It’s pretty safe to say that the last thing Big Insurance needs right now is more help from Congress. Yet, that’s exactly what even some congressional Republicans want to do.

The biggest example here is in the area of “surprise medical billing.” This phenomenon, in which an insurance company refuses to pay a medical bill incurred at an in-network hospital or other facility and instead passes it along to the patient, is all too well known to us. According to the Kaiser Family Foundation, 1 in 5 people in the United States has received a surprise medical bill (which means if we haven’t, we know someone who has). This tends to happen most frequently at in-network hospitals and emergency rooms, but partially serviced by out-of-network doctors and ambulance services.

The question policymakers ought to ask is why the insurance company cannot simply pay the bill, albeit after a vigorous negotiation with the provider. Instead, congressional committee leaders want to enable the nonpayment by bailing out Big Insurance. Their “solution” to the surprise bill problem is a government price control: requiring that a below-market level be paid by the insurance company and accepted by the provider instead of a free-market negotiated amount.

Back in April, sources close to Senate HELP Committee Chairman Lamar Alexander (a Republican from Tennessee) confirmed that he was trying to impose this price control solution on coronavirus legislation. Alexander’s committee has joined forces with House Energy and Commerce Committee Chairman Frank Pallone (a Democrat from New Jersey) to advance price control legislation in this area. For his part, Pallone has come under fire in recent days from black leaders in his state for the disproportionate effect surprise bill price controls will have on the African American community.

Enacting the Pallone-Alexander legislation would mean that medical providers already strained to the breaking point by the health crisis would face ratcheted down price controls on top of everything else. The proper policy solution is not for the government to impose a price control on radiologists, anesthesiologists, and ambulance services. It’s to encourage insurance companies to negotiate in good faith and hammer out a deal with providers. That’s the solution the Coalition Against Rate Setting has advocated for (an alliance of virtually every conservative activist group in Washington, including the Center for a Free Economy, which I lead).

The other area in which healthcare price controls have reared their ugly head is in drug pricing. Imposing price controls on prescription medicines might seem like an odd thing to do when the whole world is relying on pharmaceutical manufacturers to develop therapeutics and eventually a vaccine to the coronavirus plague, but Senate Finance Committee Chairman Chuck Grassley (a Republican from Iowa) is still intent on doing so.

In a March tweet, Grassley called for his Medicare prescription drug price control bill (which he co-authored with committee ranking member Sen. Ron Wyden, a Democrat from Oregon) to be part of coronavirus legislation:

The appeal of price control legislation such as the Pallone-Alexander bill for surprise medical bills and the Wyden-Grassley bill for Medicare prescription drugs is understandable on a certain level. After all, each bill is scored by the Congressional Budget Office as saving money for taxpayers, and politicians can point out short-term relief for seniors and other patients. It’s probably not a coincidence that both Alexander and Grassley are giving up their respective committee gavels at the end of the year (Alexander is retiring from Congress entirely), leaving the fallout from their respective bad policy choices to their successors.

After the initial apparent relief of government-imposed lower prices, patients can expect to see a second shoe drop on them: fewer medical services available. As the government forces doctors, ambulances, and drug manufacturers to lose money, these medical professionals will simply offer fewer of their goods and services to the general public. The law of supply and demand cannot be repealed. This scarcity then invites the government to ration the care which remains — the old story of the government “fixing” a problem, only to have to resort to more government intrusion to fix the fix.

Coronavirus legislation should be targeted at the virus, not on helping out Big Insurance with price controls on the medical providers it pays.

Ryan Ellis (@RyanLEllis) is the president of the Center for a Free Economy.