The late Austrian economist Joseph Schumpeter popularized the term “creative destruction” to define the process by which a free market abandons less efficient means of production for more favorable ones, thereby creating greater value for society on a whole. Oftentimes, this means the destruction of businesses through competition. But fair competition comes from other businesses, not government regulations.

The fear that Obama Care would stifle business as opposed to encourage it has now become reality. On June 2, Virginia-based nHealth announced its decision to cease operations, citing “uncertainties in the regulatory climate coupled with new demands imposed by national health care reforms.” Few people doubt that private enterprise is more efficient than government bureaucracy. However, the government, through legislative or administrative means, can establish an environment where no amount of innovation can succeed, a feat diametrically opposed to the free market.

nHealth described the new minimum loss ratios – the amount of money paid out to claims in relation to the amount kept for overhead and profit – as being particularly detrimental to their business. By restricting flexibility on these loss ratios, the federal government has directly legislated how much profit an insurance company can make.

Since the Code of Hammurabi, the earliest known codified rule of law dating back to 1790 B.C., governments have in some way regulated business, but rarely before in American history has our federal government taken such a direct and destructive role in business. Rest assured nHealth will not be the last casualty in the Obama Administration’s takeover of the health care industry.

– Spencer Harris