A new report from the Congressional Budget Office (CBO) has found that the overwhelming majority of Americans will pay lower premiums if the Senate’s health care legislation were to become law. The analysis — commissioned by key Democratic moderate Sen. Evan Bayh (D-IN) — analyzes the bill’s effects on premiums in 2016 and undermines almost every argument put forth by Democratic moderates and Republican critics of health care reform.
Instead of the outcomes critics have argued would result from health care reform (increased premiums, government-takeover of private coverage), the CBO report states that the new insurance regulations would generate administrative savings, the exchanges would give small businesses the advantages of large risk pools and the public option would lead to lower premiums for Americans with private coverage.
According to the budget office, under the Senate legislation, the overwhelming majority would on average pay the same or less for health care coverage. For people purchasing coverage in the none-group market, premiums savings are attached to more generous benefits than policies available today:
|Price Of Insurance WITHOUT Reform||Price of Insurance WITH Reform||Effect On Premiums|
|Large Group Market (70% of Population)||$7,400 Individuals / $20,300 Families||$7,300 Individuals / $20,100 Families||Families could save up to $200 in premiums.|
|Small Group Market (13% of Population)||$7,800 Individuals / $19,300 Families||$7,800 Individuals / 19,200 Families||Families could save up to $100 in premiums.|
|Nongroup Market (17% of Population)||$5,500 Individuals / $13,100 Families||$5,800 Individuals / $15,200 Families||Majority purchasing coverage through exchanges would pay less for more substantive coverage. Americans who don’t receive subsidies in the exchanges would pay 10-13% more for more substantive coverage.|
The report also concluded that the small business tax credit would further reduce premiums by 8%-11% for people who will receive the additional subsidy (approximately 12% of people in the small market). Small businesses that purchase coverage through the exchanges, will purchase plans with “lower administrative costs, on average, than the policies those firms would buy under current law.” The new market rules that prohibit insurers from rescinding coverage or denying coverage based on pre-existing conditions will also generate administrative savings, the report found.
Moreover, the additional competition within the exchanges would reduce average premiums “by encouraging consumers to enroll in lower-cost plans and by encouraging plans to keep their premiums low in order to attract enrollees.” The public option will lower premiums by injecting competition into the market place and covering sicker enrollees at a lower cost. While public option premiums could be slightly higher than premiums in private plans, the CBO found that average private premiums would be even higher if the people enrolled in the public plan enrolled in private plans.
The report found that the new taxes on the health industry would only slightly increase premiums and any cost-shifting from the Medicaid expansion “would be minimal.” “The fact that private insurers pay providers higher rates, on average than Medicare and Medicaid is not evidence that cost shifting occurs,” the budget office concluded.
Finally, the CBO estimates that the excise tax on high-cost plans would only effect 19% of employer-based policies in 2016. “On net, CBO and JCT estimate that the excise tax and the resulting behavioral changes [most employers would offer cheaper coverage]…would reduce average premiums among the 19 percent of policies affected by the tax by about 9 percent to 12 percent in 2016.”