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THE MUSINGS OF A TRADITIONAL SOUTHERN DEMOCRAT

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Location: Douglas, Coffee Co., The Other Georgia, United States

Sid in his law office where he sits when meeting with clients. Observant eyes will notice the statuette of one of Sid's favorite Democrats.

Friday, October 01, 2010

Insurer Cuts Health Plans as New Law Takes Hold

From The New York Times:

The Principal Financial Group announced on Thursday that it planned to stop selling health insurance, another sign of upheaval emerging among insurers as the new federal health law starts to take effect.

The company, based in Iowa, provides coverage to about 840,000 people who receive their insurance through an employer.

Principal’s decision closely tracks moves by other insurers that have indicated in recent weeks that they plan to drop out of certain segments of the market, like the business of selling child-only policies. State regulators say some insurance companies are already threatening to leave particular markets because of the new law. And some regulators in states like Maine and Iowa have asked the Obama administration to give insurers more time to comply with some of the new rules.

“What you’re seeing is the beginning of some serious math and some posturing,” said Len Nichols, a health economist and policy expert at George Mason University. While some insurers, like Principal, are choosing to leave the business rather than make the necessary investments to stay, others may be simply trying to delay some of the new rules or overturn them, he said.

More insurers are likely to follow Principal’s lead, especially as they try to meet the new rules that require plans to spend at least 80 cents of every dollar they collect in premiums on the welfare of their customers.

“It’s just going to drive the little guys out,” said Robert Laszewski, a health policy consultant in Alexandria, Va. Smaller players like Principal in states like Iowa, Missouri and elsewhere will not be able to compete because they do not have the resources and economies of scale of players like UnitedHealth, which is among the nation’s largest health insurers.

Mr. Laszewski is worried that the ensuing concentration is likely to lead to higher prices because large players will no longer face the competition from the smaller plans. “It’s just the UnitedHealthcare full employment act,” he said.

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