Congressional Budget Office
November 30, 2009

The analysis looks separately at the effects on premiums for coverage purchased individually, coverage purchased by small employers, and coverage provided by large employers.

Nongroup Policies

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 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.

Employment-Based Coverage

By CBO and JCT’s estimate, the average premium per policy in the small group market would be in the vicinity of $7,800 for single policies and $19,200 for family policies under the proposal, compared with about $7,800 and $19,300 under current law. 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.

Those figures do not include the effects of the small business tax credit on the cost of purchasing insurance. A relatively small share (about 12 percent) of people with coverage in the small group market would benefit from that credit in 2016. For those people, the cost of insurance under the proposal would be about 8 percent to 11 percent lower, on average, compared with that cost under current law.

http://www.cbo.gov/ftpdocs/107xx/doc10781/11-30-Premiums.pdf

Comment:

By Don McCanne, MD

For most individuals and families, the Senate health care reform bill will have very little impact on the premiums to be paid for health plans. There are three important exceptions:

* Premiums in the individual market will increase significantly because the plans will be required to provide an actuarial value of 60 percent, higher than the average value in the current individual market.

* About 57 percent of individuals eligible for coverage in the exchange will receive subsidies which will more than offset the premium increases. Note that most individuals are not eligible for coverage in the exchange and would not receive these subsidies.

* Although there will be little change in premiums for small group plans, about 12 percent of people in the small group market will benefit from a small business tax credit designed to encourage small business owners to offer coverage to their employees.

The really bad news in this report is that, on average, premiums for group plans will continue to increase at the same intolerable rates that they would have if we did nothing. This CBO analysis demonstrates that, in 2016, the family premium alone for employer-sponsored coverage, not including deductibles and other out-of-pocket costs, would be over $20,000 for a large group plan, whether or not the proposed legislation is enacted. That is quite a hit for a hard-working family with a $60,000 income.

The only hope for premium relief is for innovative insurance products that would reduce costs for those who don’t need health care, but would increase even more the costs for those who do. This demonstrates why focusing on premium relief has been a misguided endeavor. We have been diverted from the the much more important goal of relieving the financial burden of those who actually need health care.

We can achieve that goal by improving Medicare, funding it equitably, and using its monopsonistic powers to provide us with greater value in our health care purchasing. Had we done that when the Clintons were proposing their flawed model of reform, our national health expenditures would be about 20 percent less than they currently are.

It’s tragic that we would be starting from an inflated baseline, but we can still achieve that level of efficiency in the future if we dumped the highly flawed proposal before Congress and adopted the much more humane system of an improved Medicare for all.

An Analysis of Health Insurance Premiums Under the Patient Protection and Affordable Care Act

Congressional Budget Office
November 30, 2009
The analysis looks separately at the effects on premiums for coverage purchased individually, coverage purchased by small employers, and coverage provided by large employers.
Nongroup Policies
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 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.
Employment-Based Coverage
By CBO and JCT’s estimate, the average premium per policy in the small group market would be in the vicinity of $7,800 for single policies and $19,200 for family policies under the proposal, compared with about $7,800 and $19,300 under current law. 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.
Those figures do not include the effects of the small business tax credit on the cost of purchasing insurance. A relatively small share (about 12 percent) of people with coverage in the small group market would benefit from that credit in 2016. For those people, the cost of insurance under the proposal would be about 8 percent to 11 percent lower, on average, compared with that cost under current law.
http://www.cbo.gov/ftpdocs/107xx/doc10781/11-30-Premiums.pdf

For most individuals and families, the Senate health care reform bill will have very little impact on the premiums to be paid for health plans. There are three important exceptions:
* Premiums in the individual market will increase significantly because the plans will be required to provide an actuarial value of 60 percent, higher than the average value in the current individual market.
* About 57 percent of individuals eligible for coverage in the exchange will receive subsidies which will more than offset the premium increases. Note that most individuals are not eligible for coverage in the exchange and would not receive these subsidies.
* Although there will be little change in premiums for small group plans, about 12 percent of people in the small group market will benefit from a small business tax credit designed to encourage small business owners to offer coverage to their employees.
The really bad news in this report is that, on average, premiums for group plans will continue to increase at the same intolerable rates that they would have if we did nothing. This CBO analysis demonstrates that, in 2016, the family premium alone for employer-sponsored coverage, not including deductibles and other out-of-pocket costs, would be over $20,000 for a large group plan, whether or not the proposed legislation is enacted. That is quite a hit for a hard-working family with a $60,000 income.
The only hope for premium relief is for innovative insurance products that would reduce costs for those who don’t need health care, but would increase even more the costs for those who do. This demonstrates why focusing on premium relief has been a misguided endeavor. We have been diverted from the the much more important goal of relieving the financial burden of those who actually need health care.
We can achieve that goal by improving Medicare, funding it equitably, and using its monopsonistic powers to provide us with greater value in our health care purchasing. Had we done that when the Clintons were proposing their flawed model of reform, our national health expenditures would be about 20 percent less than they currently are.
It’s tragic that we would be starting from an inflated baseline, but we can still achieve that level of efficiency in the future if we dumped the highly flawed proposal before Congress and adopted the much more humane system of an improved Medicare for all.