What happens to the American economy when, as is inevitable, the health insurance industry collapses? *UPDATED*

AJ Strata, who knows complex computer systems, has a few choice words about the administration’s recent statements regarding its plans to fix the exchange.

Also, here’s something I’m not seeing discussed anywhere:

As you’ll recall, the anti-corporate Left concluded that GM was too big to fail and that banks are too big to fail (although not to big to shake down).  However, the same Leftists seem perfectly good with the collapse of the insurance industry.  When I say “collapse of the insurance industry,” I’m not just talking about the fact that Americans will be uninsured.  For the Left, that’s an outcome devoutly to be wished, since they can then socialize medicine.  I’m speaking, instead, about the actual collapse of companies that employ tens of thousands of people and have billions of dollars in pension plans.

Because insurance companies are no longer providing insurance (i.e., pricing their services using actuarial risk tables) but instead are simply being forced to pay for products by taking from the rich and giving to the poor (which makes them sound like Robin Hood, except they’re a Robin Hood who’s acting only because the Sheriff of Washington has a bow and arrow pointed at his back), they will go broke eventually.  And if the young and healthy refuse to buy insurance, the companies won’t just go broke eventually, they’ll go broke immediately.

Then what?

What happens to the American economy when Blue Cross and Blue Shield and AETNA and Kaiser and all the other insurance companies collapse in a distempered heap and, at the same time, hand their tens of thousands of employees pink slips, along with the assurance that all their retirement benefits are gone with the wind?

I’m thinking that, when that day comes around, 2008 will look like a trial run for total and complete economic collapse in America.  I have no contingency plans for that eventuality.  I can only hope that my family can salvage something from the wreckage, so that my last days aren’t spent at a level of poverty rivaling that of the average Calcutta street dweller.

UPDATEYuval Levin is on the same page as AJ Strata when it comes to the problems associated with the “best and the brightest” swooping in to help out.

I seek answers from those more economically sophisticated than I am

Begging

I have a few questions to ask, all of which involve economic trends.

Why, if the economy is contracting and the labor market is flat-lined, has the stock market gone up?

Will the stock market stay up (long-term and short-term predictions, please)?

The IRS says that families will be paying $20,000 for health insurance.  It also says that the top penalty for failing to buy insurance is less than $3,000.  Medical insurance companies can no longer turn away people with pre-existing conditions.  This means that people can avoid the $20,000 fee, pay the small penalty, and buy “insurance” only at the time they need it.  (Or, more accurately, buy “cost shifting” when they need it.)  Can the insurance companies stay solvent under these circumstances?

If insurance companies cannot stay in business with this non-insurance fee structure imposed upon them from above, how will they change?  Most are diversified.  Will they simply abandon health insurance?  They cannot refuse to pay onerous fees, because payments are forced upon them by law.

Will the death of insurance companies create a medical black market, where people pay cash for services?  In a way, this wouldn’t be so bad, because it would do away with the moral hazard that comes from both huge insurance companies and government interference.  With those huge systems, people have no incentive to shop around for better or more affordable treatment.

Obama’s Consumer Financial Protection Bureau is forcing banks to give unsecured, low-interest home loans again.  These loans, and the machinations into which the financial industry entered in order to protect itself from the downside risk of such loans, triggered the 2008 recession.  What will happen this time around?  Will banks go out of business?  Will they come up with some grand new scheme?  I assume that, if they do the latter, it will implode.  The last time, it took around two decades before the Ponzi scheme collapsed.  How long will it take this time?

I will appreciate any and all answers to these questions.  I truly don’t understand what’s going on in today’s economic world.  Incentives are flipsy-wopsy and trends make no sense.

Money

I’m shocked! Shocked! The Obama administration has been lying again.

Conservatives of all religious stripes have been attacking the ObamaCare mandate regarding birth control and abortifacients on religious grounds.  The Obama administration’s response was to introduce an “accommodation” under which the insurance companies will henceforth offer these medicines and services for “free.”

Anybody past the age of five understands that, in this life, nothing is free.  The same opponents immediately pointed out that religious institutions and people of conscience will still be funding an insurance package that includes morally reprehensible products.  After all, someone has to pay, right?

Wrong! says the administration.  No one has to pay because all “health care” products have a negative cost effect on the insurance companies.  By forcing the companies to provide preventive services for free, the Obama administration is actually saving the company’s money.  Never mind the fact that, in the real world, if there really was a cost savings, the insurance companies would already be offering these products and services for free — and then, in order to compete in the insurance market, they would be passing these savings along to their customers.

Aside from ignoring marketplace realities, the Obama administration is apparently lying as well:

[T]here is no evidence that a mandate on insurance companies to provide contraception is cost-neutral. A search of PubMedturns up nothing.

Tory Bunce, policy director at the conservative Council for Affordable Health Insurance, told IBD, “In our research, we’ve looked at the cost of mandates on the state level. We’ve asked our members to price these mandates in their actual policies. What we’ve been told from the actuaries is that the contraceptive mandate costs 1%-3% of premiums.”

Read more here about yet another administration lie, one that a complicit MSM cheerfully passes along to a credulous public.

Risks and strategies re health care *UPDATED*

Here’s what I see going on and, please, correct me if I’m wrong:

Reconciliation is a red herring.  Right now, the House is being promised that, if it votes on the Senate bill, the Senate will fix differences between the two bills through reconciliation.  So everyone is focusing on whether the Senate will indeed have the votes for reconciliation.  That is irrelevant.  Once the House, with that carrot dangling before it, votes on the Senate bill that bill will become law.  Reconciliation will vanish!  Poof.  Gone.  The thing we need to do is stop worrying about reconciliation in the Senate and start focusing on the House itself.

If you live in a District with a liberal House member, as I do, my suggestion for derailing that Representative’s vote is to taunt that person for selling out to the insurance companies.  After all, while government is taking over providing health care, each and every one of us will still be forced to pay big bucks to an “evil insurance company” to pay for that health care.  This is a twofer, in other words:  a government takeover and an unprecedented corporate boondoggle.  Your liberal representative is excited about the government takeover, but the base can still be inflamed over that corporate giveaway.

In any event, that’s the tactic I tried with my Representative, telling her that a “yes” vote on the Senate bill would mean that she’s now owned by the insurance companies.  My thinking was that you have to argue with people in terms they understand.

UPDATE:  Rush corrects the flaw in my thinking and explains precisely why Lynn Woolsey and others of her stripe are all for this bill, one that ostensibly forces people to buy insurance.  Two things:  First, the penalty for failing to buy insurance is hugely cheaper than the cost of buying insurance.  Second, insurance companies are no longer going to be allowed to play the odds of calculating whether some will get costly illnesses and others won’t.  Instead, under the Senate bill, they must sell insurance to people after they get sick.  Meaning, as Rush said, it’s not insurance at all.  Under this scheme, the only ones who will get insurance are people who are already sick, which will quickly bankrupt the insurance system.  Once that happens . . . voila! Public option.