Insurance company update

Pelosi said the House may adopt a Senate provision that would assess a
flat fee on insurance companies that is expected to generate about $40
billion over 10 years, as a way to pay for its reform bill.

Here is more.  The WP reports:

The blunt admonition echoed a round of harsh statements Wednesday from
senior Senate Democrats, and came in response to the insurance's
lobby's aggressive campaign to block reform legislation from advancing.


If I understand correctly, Tyler finds it undemocratic and contrary to the rule of law for the administration to threaten to change proposed legislation to punish someone who reneged on an informal deal, someone who had stood by during months of negotiations, while political capital was risked and lost, and then dropped a bomb on the eve of an important vote. I'm just not that offended. First, that type of thing happens routinely in private sector business dealings; no one claims a private party who spent months negotiating must stand idly by when the other side reneges on understandings that were the basis that allowed negotiations remain ongoing. No one claims that is contrary to the rule of law. Second, in the private sector, parties can protect themselves from brinksmanship of the type attempted by the insurers with a variety of contractual provisions, like lock in fees, break up fees, standstill agreements, exclusive dealing agreements, etc. Those aren't available to a govt. Absent such tools, how is an administration which actually wants to pass complex legislation supposed to manage that feat? Of course, Tyler does not want the govt to pass complex legislation, so he attacks the tools necessary to accomplish that end. Third, the flat tax seems admirably transparent, something that voters can see and, if they dislike it, vote the bastards out. Would you rather retaliation take place behind closed doors, through denial of contracts or other mechanisms that are not subject to popular oversight?

I can't help but sense that this is just a straw man argument. Let me construct a narrative to see whether it is as slam-dunk a case of dirty politics as Tyler is trying to make this out to be:

The government tries to ensure low-cost insurance coverage to all its citizens through a variety of measures, many at the cost of large corporate entities, who then turn hostile to the government by spreading disinformation and downright lies in order to defeat said legislation. The government, seeing that the corporate entities are going to fight tooth-and-nail against the public interest, realize that the best thing to do is to ignore their protestations and go ahead with taxation of said industry, the proceeds of which shall go toward funding Universal Health Care for citizens. Perhaps the industry's intransigence has caused the tax. However, that is far from proven. All the legislators have been freely elected by the citizens of the nation.

Big f*ckin deal.

Seriously. Are we defending political retribution? Would the defenders care if this was bush doing it?

Henge -- I can't tell if you're actually defending "bribes" and "threats," or if you're just saying they're inevitable.

If you're saying they're inevitable ("part of the game"), then that's irrelevant to Tyler's point. They might be inevitable but bad. A certain level of murder is inevitable in a large city; each individual murder is still bad.

But maybe you mean that bribes and threats are an actively good thing, in this context. From a big picture perspective, this is scary because heavily-regulated businesses are important voices in American policy debates. Targeting them *because* of their participation in the debate is scary, even though targeted taxes in general are fine. (In the same way, law enforcement officials exercise perfectly legitimate discretion in deciding whom to investigate; but if the officials went on a massive fishing expedition against a company because its owner had spoken out on a political issue, I think we'd all be concerned.)

This is the core difference between the government and private parties: private parties can't impose taxes, can't launch criminal investigations, can't legislate to hobble their competitors' activities. Now, you argue that the private parties use contracts to secure themselves against bad faith in complex negotiations. But there's no reason why the government couldn't do the same thing. The government is perfectly capable of contracting; it does so all the time. Individual politicians can't contract with private companies to arrange a political bargain, but that's not because of some disability that prevents the government from contracting: it's because we consider such contracts to be corrupt.

to matth

Just when I was wondering if the whole world had gone nuts I read your most excellent post.

What if Congressional retribution took the form of creating a national health care market? (I assume that by reducing market segmentation such a move would cut into the market power and profitability of the insurance industry as it exists.) That is, what if those in power tried to extort the industry with the threat of pro-market reforms? Should our reaction be the same? Why or why not?

>> I don't recall post after post about how bad it was for Goldman Sachs threatening to take down the world financial system unless they got paid. But that is what they did, and those are the posts that Tyler didn't write.

That's a good point.

The health care debate is divided roughly along political party lines and hits on a more personal level (everyone knows the insurance company horror stories), which explains why people actually give a damn.

Having worked in insurance as an actuarial analyst, I can tell you without a doubt that for personal lines, unless you're financially secure, you are best off with the minimum legal amount of insurance (some states require auto coverage). If you're not finanically secure, my favorite analogy here is picking between a 10% chance of getting hit by a missile (no insurance) or a 100% chance of getting hit by a tenth of a missile (insurance) - you are geting wiped out either way.

">> I don't recall post after post about how bad it was for Goldman Sachs threatening to take down the world financial system unless they got paid. But that is what they did, and those are the posts that Tyler didn't write."

First of all, have you been on sabbatical for the last two years, maybe at an Amish farm where they don't allow the internet?

Second, it wasn't Tyler promoting too big to fail, and I don't even remember hearing Goldman Sachs say anything publicly. It was nearly all the mainstream economists and people like Geithner, perennial public servants, who only have three numbers in his rolodex. Him and Skeletor who used to work at GS. Having regulators utterly captured as a virtue of the system is what Tyler is arguing against-e.g. equality before the law. It was the government that didn't put any stipulations on their bailout of AIG to limit it to real economy insurance contracts and not straight pass-throughs to the likes of GS. Don't hate GS because they are beautiful, or in the modern vernacular, don't hate the playa, playa, hate the game.

Third, I understand that most people don't distinguish what the government does in our name from what companies do and that we can believe it is evil and yet tolerate it because they are not directly under our control and we are not directly under their control and because we believe that a (relatively) free(r) market that offers choice is the best defense against being held hostage to corporations.

Anyone who thinks that this will actually punish the insurance companies--i.e., that the companies will not pass along the added expense to the consumer--please speak up. This is a way to raise taxes while "defending you from the Big Bad Insurance Co".

Won't this just push organizations to self-insure and avoid the tax?

I see the problem: you think that government:guns as corporations:words. Of course Tyler doesn't think the government can't respond in kind. He's aware that they've already done what the insurance companies just did. What it seems he's opposing is taking it into the realm of force, which corporations can't even pick up arms in

good and thank you

I gree with it!

If the government is planning on increasing taxes for the insurance companies won't that mean that people won't be able to find cheap auto insurance anymore? I'm sure that the insurance companies will include the price of the extra taxes in their insurance policies because I doubt they are willing to lose any money.

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