Tthe changes are meant to put more information in the hands of consumers who often struggle to understand language written by lawyers in the fine print of their statements. Here are some changes that will surely be welcomed by consumers.

- Eliminating universal default. Pay one account late and the interest rate on your other accounts zooms up? Not any longer.

- Limiting interest rate hikes. For example, the APR you have on a new account can’t increase during the first year unless you have a “teaser rate,” the rate is tied to an index, or you’re more than 60 days late on a payment.

- No more pay to pay. You can’t be charged to pay your bill over the telephone, electronic transfer or any other method of getting your money in on time.

- Total payout disclosure. Clearly written on your statement will be how long it will take to pay the account if you only make the minimum required payments – and how much it will ultimately cost.

- 45 days notice of significant changes to terms. If your credit card company is going to hike your APR or fee charges, you now have plenty of notice. Even better: you can opt out of the increase by suspending the card and concentrating on repaying the balance.

Also, according to the WSJ,

“Customers can only exceed their credit limit if they agree ahead of time to pay a penalty fee. And unless a cardholder misses payments for more than 60 days, interest-rate increases will affect only new purchases, not existing balances.”

While the changes appear to be positive, the flip side is that they are likely to elicit a backlash from banks in the form of drawing down on credit lines, higher interest rates and all sorts of fees. These regulations on credit card lenders are estimated to cost the industry $12 billion annually. While these rules may stem from a desire to protect consumers, they may result in a diminishing of credit lines at a time when millions of Americans are struggling and might have planned to tap into their lines of credit. As Newton’s law reminds us, for every action, there is an equal and opposite reaction, and this case is no exception to the rule. As the WSJ warns, “get ready for higher annual fees, higher balance-transfer charges, and growing charges for overseas transactions.”

So it turns out that these regulations may turn out to be less helpful for consumers than they appear on the surface. This is what the current administration and majority in Congress can’t seem to understand; overreaching in the private sphere via this kind of regulation is not a foolproof formula for helping consumers. Sure, lenders operate according to a profit motive, but people run their own budgets similarly. The government should focus on providing incentives for businesses to expand and hire if they’re worried about people’s ability to pay off their debt, not on strangling lenders. And with lenders already hard-hit by the economic crisis and customers defaulting on their debts, they will look to make up lost profits elsewhere or decrease lending, which is bad for lenders and consumers alike.

Back in May of 2009, I wrote that Congress should tread lightly on credit card reform for this very reason. Erecting obstacles to the extension of credit is no way to get yourself out of a credit crunch. Here we are in 2010, and the Obama administration still hasn’t gotten this message. And once again, consumers will be stuck footing the bill for  their mistakes in the form of new fees soon.

According to Alter:

“The core principle behind health-care reform is-or should be-a combination of Social Security insurance and civil rights. Passage would end the shameful era in our nation’s history when we discriminated against people for no other reason than that they were sick. A decade from now, we will look back in wonder that we once lived in a country where half of all personal bankruptcies were caused by illness, where Americans lacked the basic security of knowing that if they lost their jobs they wouldn’t have to sell the house to pay for the medical treatments to keep them alive. We’ll look back in wonder-that is, if we pass the bill.”

House Majority Whip Jim Clyburn (D-S.C.) agrees wholeheartedly with Alter, observing of the town hall protestors, “This is all about activity trying to deny the establishment of a civil right.”

Ending discrimination against the sick? A civil right? Are proponents of this argument really equating decisions made by private insurance companies operating within a framework that imposes a string of government regulations on them, that in turn limit access to would-be consumers, with civil rights violations?

First of all, this position confuses discrimination with disparity. Civil rights protect individuals from being singled out on the basis of any number of federally-protected characteristics including race, gender and disability to name a few. But not every disparity rises to the occasion of discrimination. Some instances of discrimination, or distinguishing one person or group of people from another, are perfectly legal, particularly in private settings.

Secondly, if you take the left’s argument that failing to provide a good to people who need it amounts to a  denial of their civil right to that good, where do you draw the line? As I wrote last week, health insurance is a good, a contractual obligation by which the insurer promises to pay out on the insured’s behalf should a certain agreed-upon event occur. In exchange, the insured promises to pay the insurance company in order to maintain coverage. The insured doesn’t receive a tangible good, but a reassurance, a warranty, from the insurance company.

As a private business, like other companies, insurance companies are under no obligation to do business with anyone. When you apply for a loan for example, the creditor has every right to reject your application based on a number of factors that might signal to them that the level of risk you present to them as an investment is unacceptable. As long as their reasons are legitimate and are not based on any of the aforementioned federally-protected characteristics, they have every right to ‘discriminate’ against you. In our society, we’ve come to equate discrimination with immoral behavior, when in reality to discriminate means to treat one differently based on a number of reasons, the majority of which are legitimate.

The inability to pay for a good or service based on disparities in individuals’ economic status is the most common reason for distinguishing between consumers. I realize liberals scoff at those motivated by profits, but private industry, including insurance companies, exists solely to turn profits. The same people on the left who are believers in big-government policies that strangle insurance companies with regulations that drive up costs and limit access to insurance, then, with a straight face, turn around and argue that the system in which they’ve set the ground rules, is denying people’s civil rights. Perhaps Alter is right, that this exploitive argument could have gained the left some traction by virtue of appealing to people’s emotions. After all, that seems to be the left’s motto these days, rallying around fairness whatever the cost.

Alter’s overstretched argument confuses the cause and effect of the situation here. The cause is not discrimination, although it is the effect in some cases. The cause is that government regulations on insurance companies have deprived them of any freedom to maneuver and get creative with insurance packages that could potentially bring down costs and therefore extend insurance benefits to a greater number of people.

If liberals are serious about ending this so-called discrimination against those unable to obtain coverage, either because they’re unable to pay or because of pre-existing conditions, then why don’t they concentrate solely on a plan that zeroes in on those problems rather than transforming the entire health care system as we know it? It seems that liberals are quick to claim discrimination but will stop short of fixing it if it requires that they let go of their larger goals of centralizing power within the federal government. Indeed, this explains why House Democrats have expressed their unwillingness to vote for any bill that does not include a public option. They aren’t concerned about civil rights, but about doing anything they can to change the subject, to distract from the facts at the center of this debate because the facts aren’t on their side. This is just politics as usual from the left, quick to point the finger at those who disagree with them, as un-American, racist and now, discriminating.

*Originally published August 25, 2009 on The American Issues Project Blog, here.

I set out to do some research to see if there were any hard numbers floating around on the internet because, as Liz guessed, there certainly aren’t any in the bill. While there haven’t been any premiums set by Congress, analysts have been able to make some predictions as to how premiums will be impacted. Here’s what we do know.

This WSJ article offers great insight into the trajectory premiums would surely take under ObamaCare.

Because the tax code subsidizes private insurance only when it is sponsored by an employer, the individual market is relatively small and its turnover rate is very high. Most policyholders are enrolled for fewer than 24 months as they move between jobs, making it difficult for insurers to maintain large risk pools to spread costs.Mr. Obama wants to wave away this reality with new regulations that prohibit “discrimination against the sick”—specifically, by forcing insurers to cover anyone at any time and at nearly uniform rates. But if insurers are forced to sell coverage to everyone at any time, many people will buy insurance only when they need medical care. This raises the cost of insurance for everyone else, in particular those who are responsible enough to buy insurance before they need it; they end up paying even higher premiums. And the more expensive the insurance, the less likely people will buy it before they need it.

Another proposed reform known as “community rating” imposes uniform premiums regardless of health condition. This also blows up the individual insurance market, by making it far more expensive for young, healthy or low-risk consumers to join pools—if they join at all. And if the healthy don’t join risk pools, then premiums go up for everyone and insurers have little choice but to reduce their risk by refusing to cover those who have a high chance of getting sick, such as people with a history of cancer. This is why 35 states today impose no limits whatsoever on how much insurers can vary premiums and six states allow wide variation among consumers.

New York, New Jersey and Massachusetts have both community rating and guaranteed issue. And, no surprise, they have the three most expensive individual insurance markets among all 50 states, with premiums roughly two to three times higher than the rest of the country. In 2007, the average annual premium in New Jersey was $5,326 for singles and in New York $12,254 for a family, versus the national average of $2,613 and $5,799, respectively. ObamaCare would impose New York-type rates nationwide.

Of course, it’s no surprise that these additional regulations on insurance come at a price. If people can purchase insurance at any time and have every medical problem covered, assuming the premiums are more expensive than the penalty fees one would pay for not having insurance under ObamaCare, which is most likely a safe assumption to make, it is inevitable that many would only opt in when facing a medical issue. And everyone else who is responsible and maintains coverage in both good and bad times would foot the bill.

In addition, if doctors are under-reimbursed under ObamaCare, as they are under Medicare and Medicaid, they would try to recoup those losses somewhere else, namely by shifting the costs onto private insurers. This would, in turn, drive up insurance premiums for private insurance. One study suggests that premiums would increase between 75 and 95% under ObamaCare. And of course, as the cost of private insurance increases, more individuals and employers will be forced to switch to the public option. This is why private insurance cannot endure in a system with a public option.

In addition to the higher premiums individuals like Liz would face, there is also the penalty that small business would incur if they cannot afford to insure their employees. Jimmie Bise crunched the numbers for us here at AIP last month. He assumed a 4 or 6% penalty on small business with payrolls (not profits, payrolls – an important distinction) of $250,000 or more. The current floor for the penalty begins at 2% for payrolls of $500,000 or more and increases to 8% as payrolls increase. These penal costs will have serious consequences. Businesses will be forced to let employees go, adding more people to the unemployment lines. Or, they might try to recoup costs by raising prices, which in this economic climate, is not good for private businesses or consumers.

And finally, there is also the matter of the tax hikes that will have to be implemented to pay for this huge government program. Taxes will surely be raised on the top income brackets, which include small business owners and investors who will not have that capital to invest and will not create new businesses, opportunities and jobs they otherwise could have. However, with health care costs adding to the deficit above and beyond the $239 billion figure originally estimated by the Congressional Budget Office, it might not just be the so-called rich facing tax increases.

ObamaCare’s deficit hole will eventually have to be filled one way or another—along with Medicare’s unfunded liability of some $37 trillion. That means either reaching ever-deeper into middle-class pockets with taxes, probably with a European-style value-added tax that will depress economic growth. Or with the very restrictions on care and reimbursement that have been imposed on Medicare itself as costs exploded.

Going back to Liz’s original question, Liz and others like her, including as many as 88 million Americans that could be forced into the public option (according to a study by the Lewin Group), can expect to pay premiums that are increased by as much as 75 to 95% under ObamaCare. Add in the penalties for small business owners and tax hikes, along with the collateral damage to the economy, and the cost of this program is astronomical.

*Originally published August 16, 2009 on The American Issues Project Blog, here.

Two quotes in the WSJ article I linked to above (here) nicely sum up the debate. First, Rep. Spencer Bachus of Alabama “suggested the measure would allow the government to impinge on the rights of private corporations. “Government bureaucrats don’t know what’s best for America,” he said.” On the other side, Rep. Brad Miller of North Carolina said, “We have found out what happens when there are no rules, when there is no oversight, when there is no watchdog.”

There you have the two side of this debate. Each side is concerned with the broader ramifications of action and inaction. Action in terms of this bill puts the government in the driver’s seat once again, imposing terms on private companies and interfering instead of letting self-interested individual choices play out and determine the winners and losers. Inaction, we are warned, is what led us to the economic crisis we face now. So, action is urged.

But there are fundamental flaws in this second argument. First, as to the cause of the current crisis, it’s foolish and untrue to point to a lack of regulation as the cause of the crisis. A simple Google search of ’causes of the economic crisis 2008′ brings up 50,100,000 hits. This is too big a topic to delve into in this post, but I think it’s fair to say that government intervention through Fannie and Freddie along with individual greed and poor choices all played a part in bringing down the housing market. And, as far as I’m aware, banks, while they were greatly over-leveraged, were playing by the rules – investing in the safest market since Americans are known to pay this bill before all others – mortgages. To point the finger at banks and claim that a lack of regulation is to blame for the current situation amounts to singling out and demonizing Wall Street at worst and oversimplifying at best.

Second, it is simply a lie to claim that there were no rules, regulations or watchdogs around, and that in turn, their absence led to the dire economic situation we face. Securities laws and the Securities Exchange Commission were created long ago. They already dictate the makeup of boards of directors, including how many interested and disinterested directors there must be on each board. Further, unlike shareholders, boards of directors have a fiduciary responsibility to the company and must act in the interest of the company and its shareholders. A shareholder, however, can be anyone like you and me who purchases a stock and owes no responsibility to the company to become informed of the company’s structure, liabilities or finances at all. And unlike a director, if a shareholder becomes unhappy with the company, they can sell their shares and cut all ties instantly without any consequences.

It is always easy to blame the haves for anything that goes wrong. But it is irresponsible for members of Congress and the administration to oversimplify, spread misinformation and use the current economic climate to their advantage to inflate government at the expense of private industry and individual freedom. If people think a CEO’s salary is disconnected to his worth for the company, don’t buy that company’s stock. If they think a company is taking unnecessary risks, don’t invest in that company. Government interference is not going to solve problems that were created by many players, over an extended period of time, overnight. And, the ramifications of government continuously overstepping its boundaries like this should be worrisome for all of us.

*Originally published August 2, 2009 on The American Issues Project Blog, here.