I would argue that the health care reform bill is in touble because the Obama team made a strategic mistake: it believes the way to control costs is to push down insurance rates and thus the bill contains no direct controls on costs. The clearest demonstration that this is the strategy is the 40% excise tax on “Cadillac” health insurance. Obama stated that this tax would force companies to drop these plans, thus reducing the amount of money flowing into health insurance companies, who would then have to trim expenses, e.g. decline paying for “exotic” procedures and “excessive” tests.

It is useful to remember that health insurance companies are regulated by state insurance regulators who inter alia establish, by regulation, profit margins. The insurance regulators also set rules for adding and dropping clients. They also set care standards, which dovetail with state regulations on the health care providers themselves.

One should also consider that health care insurance is not like auto insurance or home owners insurance. In any given year almost all those covered by health insurance will require some use of the insurance, if only to pay for an annual check-up. Most people hope that they never have to use their auto insurance or home owners insurance. So, the theory that, having all people carry auto insurance spreads the risk among many, while only few will actually use it, lowers the average cost of auto insurance, does not apply for health care insurance where all will incur some expense.

Perhaps the problem lies in calling health care insurance, insurance. Why not just say we buy a health care plan. And those who cannot buy in for pre-existing conditions or who are too poor to pay can be covered by the government’s “plans.”