CBO: Premiums Under Bronze Plan Lower Than Cost Of Individual Policies Without Reform

To comply with the individual mandate and avoid paying a penalty, the Senate health care bill requires individuals to purchase coverage with an actuarial value of at least 60% — a Bronze level plan. Under such a policy, an applicant’s premiums would approximately cover 60% of the health care expenses for an average population; the remaining 40% would be paid by the individual through higher cost sharing.

But the Senate bill deems the rather high-deductible policy somewhat inadequate and pegs its affordability credits to the costs of the Silver plan, leading the Congressional Budget Office (CBO) to focus its premium estimates on Silver policies (with an actuarial value of 70%). Today, the CBO released its premium estimates for the Bronze plan in 2016 (excluding affordability credits). Under the Senate bill, Americans who want to avoid paying the penalty or purchase the cheapest policy would pay, on average, approximately $1,000 less that under current law:

Price Of Insurance In Individual Market WITHOUT Reform (2016) Price of Bronze Plan (2016) Effect On Premiums
$5,500 Individuals, $13,100 Families $4,500 – $5,000 Individuals, $12,000 – $12,500 Families Individuals and families could save up to $1,000 on average.

The numbers come with several caveats. The budget office assumed “that the average age, family characteristics, and other factors associated with health care costs of enrollees in Bronze plans would be similar to those of enrollees in Silver plans” and calculated “national averages” that are not necessary representative of “premiums for specific individuals“; those “would differ on the basis of their age, average spending on health care in their area of the country, and the specific plan they chose.”

A 60% actuarial value policy is also rather skimpy (a typical small business usually provides a plan with an actuarial value of 85%). As the budget office explains, the “lower actuarial value would reduce premiums for Bronze plans directly, because the policy would pay for a smaller share of enrollees’ costs for covered services, and indirectly, because enrollees would use slightly fewer or less-expensive services when faced with the higher cost-sharing requirements included in Bronze plans.” Individuals would also face much higher deductibles and co payments. Still, the reformed Bronze policy would have to cover the “essential benefits” specified in the legislation and would likely be more comprehensive than policies available in the existing nongroup marketplace. The affordability credits and out-of-pocket spending caps included in the final reform legislation would also lower costs for Americans between 133%-400% of the federal poverty line.