TightWind is written by Kyle Baxter. Stay Hungry. Stay Foolish.

Obama has released his own version of health care reform, and his new idea is price controls:

The president’s bill would grant the federal health and human services secretary new authority to review, and to block, premium increases by private insurers, potentially superseding state insurance regulators. The bill would create a new Health Insurance Rate Authority, made up of health industry experts that would issue an annual report setting the parameters for reasonable rate increases based on conditions in the market.

Support for price controls is based on the assumption that health insurance companies are charging their customers exorbitant prices to profit. That’s what the administration has been implying over the past few days when talking about rates rising by 39 percent. He means to say they’re taking advantage of people to profit.

The problem is, that’s false. The average profit margin for the industry is an anemic 3.4 percent. For comparison, Apple’s expected profit margin for the second quarter is 39 percent, yet there isn’t much complaint that Apple is price gouging consumers.

If rates are forced to hold steady by the federal government, this doesn’t magically eliminate what’s actually causing rising rates: increased costs for the insurers. The insurers will still have to pay those costs. Which means insurers will be forced to pare down what they cover, so they can remain break-even or profitable. In other words, the government may force insurers to ration care through these price controls. Is there any doubt that the president will use this to lambast the insurers as heartless crooks, and claim it as evidence why the government needs to be further involved in the health care market?

This doesn’t address the economic causes of rising health care costs. Instead, it uses the currently popular sentiment that business only exists to bleed people of their money to create an enemy for the people to rally against, and a progression where government control of health care is the only eventuality.

Forcing people by law to purchase health insurance, and setting health insurance rates by fiat, are just inching the foot farther into the door. Government-controlled health care lies just beyond the door.