A new report from the CBO, [pdf] issued at the request of Sen. Bayh, concludes that most Americans will pay lower premiums under the Senate's healthcare reform proposal. There are conflicting spins coming out of this report:
"CBO and JCT estimate that the average premium per person covered (including dependents) for new nongroup policies would be about 10 percent to 13 percent higher in 2016 than the average premium for nongroup coverage in that same year under current law. About half of those enrollees would receive government subsidies that would reduce their costs well below the premiums that would be charged for such policies under current law," the report says.
Though Republicans will seize on the projections that insurance premiums for individuals would increase, Democrats will highlight the conclusion that the legislation would lower premiums by 56 to 59 percent for those individuals who would receive subsidies to buy insurance on the exchange created by the legislation. Of those who participate in the exchange, 57 percent would be eligible for subsidies. The subsidy would cover about two-thirds of their premiums, the report says....
The report also provides projections for the actual average price of insurance purchased on the exchange. "Average premiums per policy in the nongroup market in 2016 would be roughly $5,800 for single policies and $15,200 for family policies under the proposal, compared with roughly $5,500 for single policies and $13,100 for family policies under current law," the agencies say.
But the CBO and the JCT emphasized that one of the reasons premiums would be higher for some people is that the insurance they would buy would be more generous, cover more services and provide greater protections against high costs due to serious illness or injury.
Here's how it essentially breaks down:
- "In the large group market, average premiums would be roughly $7,300 for single policies and $20,100 for family policies under the proposal, compared with about $7,400 and $20,300 under current law." [page 8]
- "In the large group market, average premiums would be roughly $7,300 for single policies and $20,100 for family policies under the proposal, compared with about $7,400 and $20,300 under current law." [page 8]
- "In the small group market, which is defined in this analysis as consisting of employers with 50 or fewer workers, CBO and JCT estimate that the change in the average premium per person resulting from the legislation could range from an increase of 1 percent to a reduction of 2 percent in 2016 (relative to current law)." [Page 7]
- "The majority of nongroup enrollees (about 57 percent) would receive subsidies via the new insurance exchanges, and those subsidies, on average, would cover nearly two-thirds of the total premium, CBO and JCT estimate. Thus, the amount that subsidized enrollees would pay for nongroup coverage would be roughly 56 percent to 59 percent lower, on average, than the nongroup premiums charged under current law." [Pages 6-7 ]
It's not an entirely happy picture. Nongroup market premiums will be higher under the bill, which isn't to say they wouldn't increase substantially anyway, given the industry's propensity to increase premiums. And for those currently covered by "Cadillac" plans, subject to the excise tax, the mantra of "if you like what you have you can keep it" should be "if you like the very generous plan you have now, you'll have to pay more for it."
Specifically, an estimated 19 percent of workers with employment-based coverage would be affected by the excise tax in that year. Those individuals who kept their high-premium policies would pay a higher premium than under current law, with the difference in premiums roughly equal to the amount of the tax. However, CBO and JCT estimate that most people would avoid the cost of the excise tax by enrolling in plans that had lower premiums; those reductions would result from choosing plans that either pay a smaller share of covered health care costs (which would reduce premiums directly as well as indirectly by leading to less use of covered medical services), manage benefits more tightly, or cover fewer services. [p. 9]
....Thus, people who remained in high-premium plans would pay higher premiums under the excise tax than under current law, and people who shifted to lower-premium plans would pay lower premiums under the excise tax than under current law—with other factors held constant. [p. 26]
On the whole, the CBO is better news than not, or as Krugman says, it's "a clean bill of, um, health on both its budget impact and its impact on families." But the Senate needs to ensure that those who might have sacrificed high wages for excellent benefits don't bear the brunt of the excise tax.