I can't think of a state less equipped to deal with major health insurance rate hikes than Michigan, currently mired with - this will not be a typo - 15.6% unemployment. But that's exactly what they're getting.

In the past few days, 114,000 Michigan households have received bad-news letters from Blue Cross Blue Shield of Michigan, socking individual health insurance subscribers with premium increases averaging 22%, effective Oct. 1.

Blue Cross could have said, "Hey, things could have been worse. We asked for a 56% rate hike first and dialed it back to 22%" -- but that probably would have just made folks angrier.

Instead, the Blue Cross letters simply stated, "We know every Michigan resident faces financial challenges, and we thank you for your business and loyalty to the Blues."

The two numbers, unemployment and rate hikes, have a correlation. Individual insurance has expanded by 96% at Blue Cross of Michigan in the past two years. That's because they act like a non-profit state "co-op" would in a private sector allowed to discriminate against their customers:

In just the past two years, the number of under-65 individual subscribers has grown by 59,000, or 96%, at Blue Cross, the nonprofit "insurer of last resort" in Michigan. Private for-profit insurers tend to cherry-pick younger, healthier consumers, driving older and less-healthy people to Blue Cross if they have no employer-provided group coverage.

State law requires Blue Cross to offer insurance to anyone, but it also demands that the company not lose money on its insurance products. Therein lies the rub: Blue Cross lost $133 million last year on individual subscribers.

This is that "perfect market" that conservatives like to talk about. Given the ability to discriminate over its customers, private insurers dump the sick on to Blue Cross. And because the state requires Blue Cross to break even, they must raise their premiums basically at the rate of the cost of health inflation year-over-year, often on the poorest and most vulnerable members of society.

Michigan is not the only state seeing large rate hikes in its health insurance market. Oregon small businesses are seeing double-digit rate increases this year. In California, policies have gone up 9% since 2007, three times higher than the overall cost of living. Blue Cross and Blue Shield of Rhode Island has proposed a 16% rate hike, with UnitedHealth of New England up 11.6%. Washington state consumers will see large increases as well. Overall, increases by double digits are expected nationwide.

We hear from conservatives that businesses may drop their plans under health insurance reform. Actually, that's virtually assured if nothing is done. Companies, especially small businesses, will have no chance keeping up with these ever-increasing rates and hope to compete in the global marketplace. And ultimately, those businesses who do pay for these rate hikes do so out of potential wage increases for their employees. Wage growth stagnates and people wind up with less disposable income. The money funneled to health insurance companies could be used to reverse the recession and pull us into economic recovery. In this sense, insurance companies are acting like a siphon, reducing the fuel that can be used to drive the engine of growth.

And that siphon will take more and more money out of your pocket, unless we do something now.

As someone recently said, what planet do they live on? Chuck Grassley and Ken Conrad fall all over themselves praising their co-op proposal, while Howard Dean, the Last Semi-Honest Man, calls it out as the political theater it is.

I don't know about you, but I'm pretty tired of these expedient political solutions to real-life problems. After reading Matt Taibbi's latest Rolling Stone piece on health care reform (no link yet), I now understand just how thoroughly the Blue Dogs screwed us on the public option and I would cry no tears if it disappeared in its present form:

(CBS) Former Vermont Governor and doctor, Howard Dean said the health care co-operative proposal is purely for political strategy and has not worked in the past on "Face the Nation" Sunday.

"That proposal is a political compromise, not a policy compromise," Dean said. "No one knows what it would look like and when it has been tried in the past it mostly hasn’t worked."

Dean, a strong advocate for the public insurance option, said people need the choice of a government-run plan to compete with private insurers. He argued that because private insurance companies are investor-owned, they are spending less money on health services and more on equity.

Medicare, Dean said, "is by nature much more efficient" because currently seniors can move, leave their job and get sick without having their coverage discontinued.

"Everybody over 65 has it and the question is 'Why don't we open up that program,'" he said.

[...] Dean said "we are getting pretty mixed signals from Senator Grassley. … I think the Republicans owe it to this country to give us a clearer sense of what they will and will not support."

Senators Charles Grassley, R-Iowa, and Kent Conrad, D-North Dakota, appeared earlier on "Face the Nation," saying that the public option plan would not find enough support in the Senate. The co-op solution, they said, would be the only hope for a bipartisan agreement.

Dean also said the $600 billion dollar House price tag on health care is "reasonable" because it is less than we are spending in Iraq and Afghanistan.