The combined effect of these provisions thus turns all private health care providers into public utilities. At this point, the United States Constitution should protect these private health care plans from state confiscation of their shareholder-invested capital, just as it does with other regulated industries like telecommunications and electricity. Historically, financial regulation has been subject to tougher judicial scrutiny than land use regulation. With land use, the courts give local communities extensive power to regulate aesthetics and neighborhood character. But those physical externalities vanish when the only issue on the table is whether or not the government system allows health care firms a fair return on their invested capital.

It doesn’t. H.R. 3200 strips health plans of their power to select their customers and their contract terms. Worse still, its rebate provision takes a heads-I-win-tails-you-lose approach to profits. Investors know that the inability to set off present losses against future gains will drive their firms into bankruptcy. And they won’t take much comfort in an exit option that forces them to sell off their assets at fire sale prices to potential buyers who will be ground to bits in the same regulatory doomsday machine. Schemes like that have been struck down on their face in telecom regulation because they don’t provide for sustainable profits. The same should hold here.