In the real world, government policies that raise the cost of doing business often lead to crippling – and sometimes even fatal – results. Here’s a story, which I saw via Instapundit and Megan McArdle, about an insurance company that is closing its doors because “federal healthcare legislation made the two-year old company’s business model unsustainable.” In her commentary, Megan displays an appropriate level of skepticism about whether bad policy deserves all the blame whenever a company goes under, but this does seem to be one of those instances since Obamacare forces health insurance companies to follow bad business practices such as allowing people to get sick before getting insurance. The loss of 50 jobs is discouraging, as is the loss of a company that was providing very sensible (or at least would be very sensible in the absence of destructive government policies) high-deductible policies that represented genuine insurance rather than inefficient low-deductible policies (i.e., pre-paid, “all you can eat” plans) that dominate the current quasi-private market:
The hotly debated healthcare reform bill signed into law in March has killed a local insurance company. At least that’s according to a brief letter Richmond-based nHealth sent to insurance agents explaining the reason behind the shuttering of the once promising local startup. “I wanted to share with you the decision by nHealth’s board of directors to exit the health insurance market,” wrote James Slabaugh, executive vice president of the Richmond-based insurance company that employed about 50 people. (Many of those were at an office in Ohio). …The letter explained that “considerable uncertainties” in the health insurance market caused by the recent federal healthcare legislation made the two year-old company’s business model unsustainable. …Nezi said nHealth tried to raise additional capital but was unsuccessful. “People got skittish about writing any more checks,” Nezi said. “Because of that uncertainty, would you invest a few more million dollars of your money in a startup if you don’t know what the rules are going to be?” That left company with only one choice. “The most prudent and sensible conclusion for us is to discontinue the sale of healthcare policies and withdraw from the healthcare business,” Slabaugh wrote in the letter. Founded in 2008, nHealth was built around a high deductible insurance plan model that utilized health savings accounts and kept costs down making consumers more involved in their healthcare decisions.
http://www.richmondbizsense.com/2010/06/04/startup-health-insurer-shutting/
