Americans were justifiably shocked when UnitedHealthcare CEO Brian Thompson was murdered on a midtown Manhattan street last December.  Perhaps more shocking was the reaction among those who rationalized the crime as a consequence of legitimate frustrations with skyrocketing healthcare costs, rising premiums, denied claims, and a healthcare system that seems to place patients near the bottom of its list of priorities. (RELATED: Rage Against the (Healthcare) Machine)

The devastating California wildfires that erupted shortly thereafter have fueled a parallel narrative, with those who have lost their homes outraged over dropped coverage. A key factor in insurers’ decisions to cancel policies, decline renewals or cease underwriting new property exposure was state regulations that limited their ability to increase premiums commensurate with heightened risk. (RELATED: California Incinerated Its Insurance Market)
What do these two stories have in common?
Each tragedy — and the ensuing reaction — illustrates the public’s misapprehension of the government’s role in creating the problem. Public officials cynically deflect all responsibility with threadbare tropes about “corporate greed” and “price gouging.”
Such demagoguery seeks to turn policyholders’ righteous anger away from those largely responsible for the rising cost, limited availability, and inferior quality of coverage: public officials, not insurers. This misdirection feeds flawed explanations of why such problems exist, and the ineffective policies proposed to address them. The wrong “villains” are targeted; in the case of Mr. Thompson, tragically so.
Consider healthcare. The mechanics of the Affordable Care Act (ACA), and American healthcare provisions more generally, give rise to distortions through the value chain as a result of government regulation and market intervention. For example, the ACA’s 80/20 rule sought to suppress healthcare premium growth by limiting insurers’ margins. Studies have shown this result...