I suppose that opponents of healthcare reform will focus on the one negative in the analysis released today by the Congressional Budget Office: i.e., by 2016 individual health plan premiums would be 10% to 13% higher after reform than under current law. To do so, however, would be a narrow and intellectually dishonest interpretation. The CBO report in my view is the strongest statement yet on the cost benefits of reform.
First, the issue of individual premiums. Yes, they would be higher on average, but that’s because people would be getting much better coverage. Notes CBO:
The average insurance policy in this market would cover a substantially larger share of enrollees’ costs for health care (on average) and a slightly wider range of benefits.
Furthermore, even though premiums would be higher, most Americans wouldn’t have to pay the higher rates because of subsidies included in the reform legislation. In fact, 57% of Americans would be eligible for subsidies, CBO notes; the amount these subsidized individuals would pay would be 56% to 59% lower than under current law. Individual (or non-group) would account for 17% of the commercial market following reform or 32 million people — of which 18 million would be paying much less for much better health insurance.
Now here’s the big news. According to CBO, premiums for large employers (i.e., more than 50 workers) would be unchanged or down as much as 3%. Large employers make up 70% of the commercial market or 134 million people. Small groups (up to 50 workers) would see premiums range from up 1% to down 2% (Note: about 12% of small groups would be eligible for subsidies; their premiums would fall 8% to 11%). Small group makes up 13% of the commercial market or 25 million people.
And what about all those fears of cost-shifting to the private insurance market? CBO notes:
The effect of the proposal on premiums through changes in cost shifting seems likely to be quite small because the proposal has opposing effects on different potential sources of cost shifting, and the total amount of cost shifting in the current health care system appears to be modest relative to the overall cost of health insurance.
So to reiterate: under reform premiums for 134 million people in large groups would be flat to down, premiums for 25 million people in small groups would be flat to down, costs for 18 million people with subsidized individual plans would be down (a lot) — and costs for 14 million unsubsidized individuals would be up 10% to 13% because they’re getting much better coverage.
All of which is why the CBO analysis is a slam dunk for reformers.
Addition (Dec. 1, 9:47 a.m.): Sorry, I failed to note that the CBO analysis specifically referred to the Senate bill.