12-1-09 Congressional Budget Office reports on premium cost under Senate bill
The Congressional Budget Office (CBO) has released an estimate of the effects the Senate health care bill may have on the cost of insurance premiums. Overall, the country’s total health care costs would increase because of the bill. The main change would be in how those costs are paid.
While this information provides some insight into the legislation, readers should note that the estimate does not take into account the effect of the increase in demand for health care services that is likely to come with more people having access to health insurance. Of course, everything else being equal, increased demand for a product or service leads to higher prices.
The estimates show that, by 2016, people with nongroup (individual) policies could pay 10 to 13 percent more in premiums. People with small group policies could pay 2 percent less to 1 percent more. People with large group policies could pay up to 3 percent less, or they could be unaffected.
However, 57 percent of people with nongroup policies would receive subsidies to help them pay for premiums, and these subsidies would cover around 66 percent of their premiums. As for small group policy holders, 12 percent would receive subsidies.
CBO projects that some people could see their premiums decrease slightly, in part because of the new health insurance exchanges. CBO analysis claims that a similar exchange system in Massachusetts reduced premiums slightly. However, as of August, 2009, Massachusetts has the highest average premiums in the country.
Currently, many younger, healthier people who have not purchased health insurance because they do not have much need for health care services. CBO expects many of these people to choose to buy health insurance because of the bill’s requirement to do so, paying $5,200 in premiums to avoid a $750 fine.
The premiums in private insurance plans could decrease slightly because many of the least healthy people in the country would move to the government-operated plan, the so-called “public option.” As a result, the premiums under the public option would be higher than private plans.
Sources:
CBO premiums estimate (pdf)
http://cbo.gov/ftpdocs/107xx/doc10781/11-30-Premiums.pdf
Boston.com – Bay State premiums highest in country
