“...price and exchange controls inevitably create harmful economic distortions. Both the distortions and the economic damage get worse with time. Meanwhile, attempts to preserve price controls induce otherwise avoidable rationing schemes and goods shortages. And when goods disappear from official markets -- except perhaps those designated for privileged consumers -- they reappear in unofficial ones, but at much higher prices.”
If it cost $20 to produce a widget and the government forces an enterprise to sell the widget for $10, then the enterprise will limit both the quality and quantity of widget production to manage to a selling price of $10 in order to be profitable and stay in business. How would this example translate into a health care insurer environment? If an insurer charges $50,000/yr. for a health insurance premium and the government requires the insurer to charge $10,000/yr. to cover health costs this may appear to be attractive to the insured. However, this “price control” imposed on the insurer incents the insurer to reduce health care coverage that would cause them to be unprofitable, e.g., reducing coverage for diabetic patients, cancer patients, heart failure patients, etc, which in turn reduces the value of the health insurance plan.