Scott Gottlieb, who has held a senior position at the Centers for Medicare & Medicaid Services, writes:

At the heart of the Obama plan [HR 3590] are 50 state-based exchanges where insurers will be able to sell health plans inside new marketplaces. The health plans that insurers market will have to comply with a strict set of government rules on the minimum benefits that they need to offer, and the amount of money that plans can spend on overhead and take for profits. These rules aren’t out yet, but most observers expect them to be rigid. This ensures that health plans will operate on tiny profit margins. …

The problem is that the actual insurance that health plans offer may be fairly lousy — perhaps just a little better than the typical managed care plan offered under Medicaid. That’s because of the way these insurance products are going to be regulated, and the way they will be priced under the federal scheme. …

So to afford the mandated benefits, health plans will have to shave other costs. They’ll do this the same way the Medicaid managed care plans deal with similar government rules – by offering very narrow networks of providers that patients can see. Or by cutting what health plans pay for services, even if it leaves beneficiaries with fewer providers willing to offer them access to medical care.

Read more: RealClearMarkets – Health Insurance Exchanges: A Race To the Bottom.