Does Obama’s Health Care Plan Really Lower Premiums?

President Obama and Sen. Lamar Alexander (R-TN) got into a bit of a spat about whether or not the Senate health care bill actually reduces health care premiums. Obama conceded that Americans who purchase coverage in the individual market would see a 10-13% premium increase, but explained that they would be paying more for better coverage.

“What the Congressional Budget Office is saying is that if I now have an opportunity to actually buy a decent package inside the exchange that cost me about 10-13 percent more but is actually real insurance, then there are going to be a bunch of people who take advantage of that. So yes, I’m paying 10 to 13% more because instead of buying an apple, I’m getting an orange.” “They’re two different things,” he said.

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To be clear, Americans who qualify for subsidies would see very large cost savings. The CBO concluded that premiums will be “56 percent to 59 percent lower, on average than the nongroup premiums charged under current law.” Families will save $100-200 annually. Families purchasing coverage in the small business market could save up to $100 annually and those who seek insurance in the large-group market could save up to $200 annually, the CBO report found. Significantly, the premiums in these new insurance plans would cover a higher percentage of health care expenses (and provide more comprehensive coverage) than what’s currently available in the individual market. As Ezra Klein put it, “[t]he fact that I could buy a nicer car after getting a better job suggests that cars are becoming pricier. The bottom line is that if you’re comparing two plans that are exactly the same, costs go down after reform.”

Under the Senate bill, Americans can also purchase cheaper ‘Bronze-level’ insurance. In fact, another CBO report found that Americans who want to purchase a policy with a higher deductible 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.

This Bronze-level policy is rather skimpy. 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.