Obama Embraces Nixonomics

Reason reports:

If a rate increase is unreasonable and unjustified, customers can head for greener pastures. Among the several dozen competing insurers in California, some presumably will leap at the chance to grab their business. If other companies decline to offer lower rates, however, it's a surefire sign that the increase is both reasonable and justified.

The administration thinks WellPoint has no reason to raise prices because it had billions in profits last year. But the company says it lost money on individual policies in California, because medical prices rose and many customers dropped their coverage, leaving the company with a sicker and more expensive clientele.

Obama may fantasize that WellPoint will keep furnishing its product forever while stoically swallowing losses. It's more likely to devise ways to curtail benefits, make it harder for applicants to qualify, and raise the hassle factor so unprofitable customers go elsewhere. If things get bad enough, it can abandon the market -- leaving consumers to pay the low rate of nothing while also getting nothing.

Steve Chapman on supply and demand.