ObamaCare’s Hotel California

In theory, then, all plans that meet ObamaCare’s minimum standards should be allowed onto the exchanges. But in California, a five-member board of political appointees will pick winners and losers. If an insurer wants entrée to the pool of subsidized individuals and businesses with fewer than 50 employees—and of course all of them do—they’ll have to genuflect to whatever dictates this board happens to decree.

Selective contracting will allow the state to “negotiate” more favorable terms, the preferred euphemism for industrial policy. The result in practice will be submarket price controls. As a condition of admittance insurers will also have to justify their premium levels and rate changes over time. Plans will still be allowed to sell outside the exchange, but in practice almost all consumers will gravitate to the exchange because of the subsidies…

In other words, less competition is the best way to drive down costs. The irony is that the California insurance market today functions reasonably well because consumers have plenty of choices. By historical accident—the political left that dominates Sacramento is preoccupied with single payer and has killed incremental proposals—state regulatory authority is divided between two state agencies, one loaded with mandates, and the other loosely regulated. Naturally, the second group has climbed to 91% of the small-business market and 48% of the individual one.