Congressional Budget Office
November 2, 2009
This letter responds to questions about the subsidies that enrollees would receive for premiums and cost sharing and the amounts that they would have to pay, on average, if they purchased a relatively low cost plan in the new insurance exchanges to be established under H.R. 3962, the Affordable Health Care for America Act, as introduced in the House of Representatives on October 29, 2009.
The enclosed table focuses on enrollees who purchase a “reference” plan (the premiums for which equal the average of the three lowest-cost “basic” plans, as defined in the bill), because federal subsidies would be tied to that average. Such a plan would have an actuarial value of 70 percent, which represents the average share of costs for covered benefits that would be paid by the plan.
Although premiums under H.R. 3962 would vary by geographic area to reflect differences in average spending for health care and would also vary by age, the table shows the approximate national average for that lower-cost reference plan — about $5,300 for single policies and about $15,000 for family policies in 2016. Enrollees could purchase a more expensive plan or more extensive coverage for an additional, unsubsidized premium — and CBO anticipates that many enrollees would do that, so the average premiums actually paid in the exchanges would be higher (although average cost-sharing amounts could be lower than those shown in the table).
Estimate for “Reference Plan” in 2016 — Average of 3 Lowest-Cost Basic Plans:
Family Policy:
70% – Actuarial value
$15,000 – Average premium
$5,500 – Average cost sharing
One example – a family of four at a higher income level:
400-450% – Income relative to the federal poverty level
no cap – Premium cap as a share of income
$102,100 – Middle of income range
$15,000 – Enrollee premium in reference plan
0% – Premium subsidy (share of premium)
none – Average cost sharing subsidy
$5,500 – Average net cost sharing
$20,500 – Enrollee premium + average cost sharing
20% – Premium + cost sharing as a percent of income
http://www.cbo.gov/ftpdocs/106xx/doc10691/hr3962SubsidiesRangelLtr.pdf
Comment:
By Don McCanne, MD
Of the many flaws in the very expensive and highly inefficient model of health care reform that Congress has selected, one of the more important is the financial impact that it will have on middle- and upper-middle income individuals and families. Let’s look at the example of a family of four with a very good income: $102,100.
The premium ($15,000) and average cost sharing ($5,500) that that family would have to pay would leave them with a net income of $81,600. That is not bad, but it certainly falls short of the $100,000 plus income that no doubt the family believes they should have.
Also that family would likely want coverage beyond the average of the three lowest-cost basic plans. They would want coverage greater than an actuarial value of 70 percent, especially since employer-sponsored coverage now provides an average actuarial value of 80 percent. They would also want more protection should their out-of-pocket medical expenses exceed the $5,500 average net cost sharing. Even with caps on cost sharing, the family would still be responsible for non-benefit products and services and for often-unavoidable out-of-network health care. Take those costs out of the $81,600 balance and that one-hundred-thousand-dollar-income family is going to be very unhappy with this reform legislation.
Do you think that they know about this? Do you think that maybe we should tell them?
Stephen B. Kemble, M.D.
Leslie Hartley Gise, M.D.
