CBO: Senate bill would increase individual insurance premiums

A long-awaited analysis found the Senate healthcare bill would raise insurance premiums for some, lower others and leave some essentially untouched, further entrenching both parties in their positions for and against the bill.

Senate Democrats and Republicans seized on the report issued Monday by the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) to bolster their arguments on the same day the floor debate formally commenced.

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To Democrats, the report affirms the bill offers affordable access to healthcare to tens of millions of people without insurance while offering modest relief to the nearly 160 million people who receive insurance through their jobs.

“Most Americans will see lower premiums as a direct result of reform,” Senate Majority Leader Harry Reid (D-Nev.) said in a statement. “Today’s analysis confirms that millions of Americans who lack the necessary coverage to avoid potential financial ruin would have access to more coverage at an affordable price because of our proposal.”

Republicans contend that the findings prove the Senate legislation would result in higher premiums for millions of people compared to what it would cost them in today’s market.

“The bottom line is this: after 2,074 pages and trillions more in government spending, massive new taxes and a half-trillion dollars in cuts to Medicare for seniors, most people, according to the Congressional Budget Office, will end up paying more or seeing no significant savings,” Senate Minority Leader Mitch McConnell (R-Ky.) said in a statement. The health insurance industry’s lobbying arms also proclaimed that the report confirmed their similar warnings.

The nonpartisan experts at the CBO and the JCT do not conclude that either side of the political debate is as correct as they say.

The report paints a complex picture of the bill’s impact to the vast health insurance marketplace by 2016.

It finds the Senate legislation would reduce premiums by up to 3 percent for 134 million people who get insurance as a job benefit. This population is by far the largest component of the health insurance market: When the reforms kick, 70 percent of people with coverage would get it from their jobs, a slight increase from the current rate.

The average premium for people who work at large companies would remain about the same: $7,300 annually for an individual plan and $20,100 for a family policy.

For small businesses that cover their workers in the so-called small group market, the average change in insurance premiums would range from a 2 percent decrease to a 1 percent increase. Factoring in new subsidies available to people with incomes below 400 percent of poverty, individuals in this market would pay 8 percent to 11 percent less than they do now. Under the bill, 13 percent of insured people would fall into this category.

According to the CBO and the JCT, that translates into $7,800 annually for an individual policy through a small employer — about the same as they pay now — and a decrease of $100 for a family plan, to $19,200.

The impact of the Senate bill on the individual market, which comprises a diverse array of people from the self-employed to those not offered coverage by their employers, is more complex to measure.

The direst finding for Democrats — and the figure highlighted by Republicans — is health insurance premiums would be 10 percent to 13 percent higher for the 13.3 million people required to buy insurance under the bill, compared to what they would pay absent the legislation.

Premiums would actually increase by the same factor for all 31 million people who would buy insurance on the bill’s new exchanges but 17.7 million of those people — or 57 percent — would be eligible for federal subsidies. Those would be offered on sliding scale for individuals and families earning up to 400 percent of poverty. The bill does allow people to retain the policies they already have without change, however.

“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 report says.

For those individuals receiving subsidies, however, insurance would actually cost them 56 percent to 59 percent less than coverage on the individual market under the current system. The subsidy would cover about two-thirds of their premiums on average.

One of the chief reasons insurance premiums would be higher for some people is that reform would require insurance companies to offer everyone in the individual and small-group market more generous and more stable coverage and increase competition among insurers, the report notes. Administrative savings would also offset the additional cost.

“Let’s be clear: where the CBO does see premiums rising, it's not because Americans are paying more for the same coverage — it's that they’re making a choice to purchase better plans that weren't previously available to them,” White House communications director Dan Pfeiffer wrote on his official blog. According to memo from the Senate Finance Committee, buying an equivalent policy today would cost 14 percent to 20 percent more than under reform.

This argument did not hold much water with Republicans.

“The Democrats bills will still require nearly 14 million Americans to purchase unsubsidized insurance that is more expensive than they could get under current law,” says a memo issued to GOP health aides by the Senate Republican Policy Committee.

Viewed alone, the improved coverage would increase premiums by 27 percent to 30 percent for individuals and up to 3 percent for those enrolled in small-business insurance plans. That increase, Democratic aides stressed, is significantly mitigated by the fact that more people — and more healthy people, especially — will be in the insurance pool, spreading the insurance companies’ financial risk across a broader population.

A Senate Republican aide contended the increase to the individual-market premiums is the number that matters. Teasing out the other effects, the aide said, is “a little bit of Bernie Madoff accounting.”

Democrats have stressed throughout the debate that health insurance premiums already are escalating rapidly under current system, which leaves tens of millions of people without coverage and many more with inadequate coverage.

“In recent years, Americans have seen their health insurance premiums creep higher and higher at an alarming rate. Health reform set out to slow those rapid increases, and today the nonpartisan congressional budget scorekeepers told us we’ve succeeded,” Finance Committee Chairman Max Baucus (D-Mont.), one of the chief architects of the bill, said in a statement.


Jordan Fabian contributed to this article.


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