Correlation or cause and effect?

Scientists and economists are trained to distinguish between correlation and cause and effect. The Boston Globe's Rob Weisman has written a series of stories that might lead us to wonder, "Which is it here?" Here's the sequence.

The MA health insurance companies (mainly non-profits) propose increases in the rates for small business and individual health insurance policies. The Division of Insurance disallows those increases and sets an arbitrary cap.

The new rates do not meet actuarial standards, which are important to maintain capitalization ratios for the insurance companies. An internal email emerges that indicates the Division's own staff has major concerns about this potential "train wreck."

The Division of Insurance puts several insurance companies under administrative oversight because of perceived financial weakness and expects to add more to the list soon.

How long will it take before some insurance company publicly posts financial results that are below state standards? What happens then? A loss in subscribers, as businesses lose confidence in that company. Then, do we see a forced merger or takeover, reducing the level of competition among the health plans?

The Division's answer: Insurers should stiff those hospitals who rates are up for renewal this year. The leaders of the state's hospital association note:

Cuts in insurance reimbursements for many of our state’s hospitals will further destabilize these institutions and are likely to lead to significant job loss at hospitals, some of which already are operating in the red.

Two train wrecks.

I vote for cause and effect.

Before we undermine two of the most important sectors of the state economy, it is time to change the rules and move away from an arbitrary system of health care finance to one that has legal accountability and transparency, one that enhances competition rather than diminishing it.