The Trump administration is making two related threats to the insurance monopolies, in an effort to lower the prices people pay in the wake of Obamacare. Both focus on the higher costs that insurance monopolies face when less healthy people are drawn into their coverage programs:
1) End the subsidies ("BAILOUTS") that the insurance monopolies get from the government, which were intended to keep them from raising their prices to off-set the higher costs of covering a less healthy group of people (poorer people, pre-existing conditions).
2) End the government mandate that everybody sign up with the insurance monopolies. If everybody signs up, that means healthier and younger people must do so, and they won't be consuming much healthcare, which off-sets the greater amount consumed by the new sicker groups included under Obamacare. If they were no longer required, that would lower the amount that these younger and healthier people spend, since they would choose to consume little or none, and would be free from financial punishment.
Both of these aspects of Obamacare are forms of the insurance monopolies extracting wealth from ordinary citizens -- the first through government funds from taxpayers, and the second through young / healthy individuals.
The propaganda argument claims that these insurance monopolies have no choice -- if they're supposed to cover a group of people that is sicker on average than under the old scheme (they are poorer, have pre-existing conditions, etc.), then that raises the costs to the companies, who now have to provide more of their products and services.
This argument is always wrong, and is just an attempt to enshrine corporate greed over consumer well-being. Very simply, if costs to the provider increase, that can just as well cause a reduction in the company's profits with no change in the prices they charge to consumers. They could eat the higher costs themselves, rather than pass them along to the consumer by jacking up their prices.
But doesn't corporate greed prevent such a caring and altruistic solution? Not necessarily. If the market for their products and services is competitive, that will take care of the greed problem. If costs rise for all insurance companies, and by similar amounts, the greedy company that tries to preserve its old profit margins by jacking up prices will see their customers flee in droves after the sticker shock. They will price themselves out of the market, which will be overtaken instead by rival companies who decide to only modestly raise their prices.
That sets off round after round of competition over price, so that they all end up at the old price and no gouging of consumers. With higher costs and similar prices and revenues, that means the seismic change took place in the area of profits -- lower margins and lower total profits.
Only if the market is highly concentrated into the hands of just a few gigantic corporations, can the providers jack up their prices in response to higher costs, and not lose all of their consumers, who have no one else to buy from.
The insurance and pharmaceutical markets are two such cases, where the sectors have become highly monopolized after decades of mergers and acquisitions, altering the landscape from dozens or hundreds of competitive providers into one where just a few tower over whatever is left. That is a major cause of the soaring prices of healthcare over the past several decades.
The #6 spot on the Fortune 500 within the US is held by UnitedHealth, which has grown to the largest HMO in the nation after two decades of buying up the major insurer in a state, going state by state until they're all part of a sprawling HMO empire. After buying out so much of the competition, they don't have to worry about losing consumers if they gouge them on prices as costs to the company increase. Where else will their consumers go? Anthem? Aetna? Humana? Same story with them.
Along with the ability to gouge consumers on prices in response to higher costs to the company, their immense wealth and concentrated power also allows them to more easily buy off the government, as they did with Obamacare. If the insurance monopolies had to cover sicker people, the insurers did not want to eat those costs themselves -- they wanted somebody else to pay for the higher costs. So they got the government to directly subsidize them, and got the government to require individuals to sign up who would not be consuming much healthcare but would still have to pay high rates.
Monopolization also weakens innovation, since one company does not have to find ways to "build a better mousetrap" -- or deliver a better product at a lower price -- in order to lure consumers away from rival companies that have worse products at higher prices. They can keep on doing whatever failed garbage has made us the sickest nation, based on how much we pay for healthcare, and not worry about angry consumers leaving for providers that give us more bang for our buck.
So, when the insurance monopolies threaten the Trump administration about how the White House's actions will force the insurers to raise their rates, the audience needs to hear this forceful rejection by the entire Trump team -- and anyone in Congress who isn't still a total sell-out to the monopolies (whether that means progressive Democrats or competition-minded libertarians -- perhaps another role for the Bernie-Rand-Trump coalition).
The American people must become accustomed to hearing the counter-argument that higher costs to some company just means the companies are going to eat those costs themselves and accept lower profit margins, or else they'll price themselves out of the market. And that if that isn't going to happen, that must mean the market is highly concentrated and needs to be broken up into many players of similar size.
In launching a populist war against the insurance monopolies, the Trump faction has to let the American people know that the plans to end government subsidies and end the mandate will be accompanied by vigorous trust-busting. In the meantime, Trump can use the bully pulpit to shame the insurance monopolies for trying to gouge the American people on prices rather than accept lower profits, when they're already richer than God and at the top of the pack in the Fortune 500.
"Here I am trying to lower h'care premiums, yet insurers insist on jacking up prices. WRONG: they eat higher costs, and accept lower profits, or monopolies will be broken up!"
Related post: same reasoning, applied to slapping tariffs on American companies who off-shore their production. That imposes a higher cost on the provider, but that does not translate into higher prices to consumers -- only lower profits for the stockholders, if the market is competitive.
Either great minds think alike, or someone with access to Trump's ear read that post and passed the message along to the man himself. Shortly after, I remember during one campaign rally when he threatened the big fat 35% tariff, he broke into an aside and said something like "by the way, that doesn't mean higher prices for consumers, because the companies will still have to compete on price".
Let's hope the Trump-verse is still listening, or that great minds are still thinking alike. We must dispel once and for all with this fiction that higher costs to a company mean the same profits and higher prices -- it means the same prices, and lower profits!