The New Health Dialogue

Here are some additional key takeaways:

Premiums should go down by even more than CBO estimates because of reinsurance and delivery system reform. The Senate reform package includes both a reinsurance fund (a way for insurers to ensure the sickest customers do not raise premiums for everyone) for the first three years of the exchange and significant delivery system reforms designed to improve quality and make health care more affordable. These features are not considered in CBO estimates. 

Insurance market reforms will lead insurers to lower administrative costs. CBO says that new insurance market rules that prohibit discrimination based on health status and require insurers to sell to everyone will reduce the cost of an existing insurance policy in the individual market by 7 to 10 percent. 

Covering the uninsured will make the risk pool healthier, reducing premiums.  CBO estimates that on average the uninsured are healthier than the insured. Not only does this directly contradict the misleading assertions made by those PricewaterhouseCoopers and Oliver Wyman “reports,” but it also proves that covering the uninsured will help the currently insured. 

Do not be fooled: health reform will not increase the cost-shift to the insured. It is true that Medicaid (and to some extent Medicare) pays providers less than costs. To a degree, this raises costs for the privately insured. Yet, the privately insured also pay more because of the unpaid medical bills of the insured. The good news is that CBO estimates that current legislation would cover enough of the uninsured to offset any impact of increased enrollment in Medicaid.

Even a “level playing field” public option would increase competition and lower premiums in insurance markets where competition is lacking. This suggests that including a public option that takes effect where competition is lacking or insurance is affordable could add real value.

Most people who buy insurance in the individual market already have coverage generous enough to satisfy the requirement to purchase coverage. CBO is a little misleading on this front because it provides an “average” increase in the amount of coverage that would be required. That includes both the coverage levels of people receiving subsidies, as well as people buying coverage on their own. Subsidy levels are tied to health insurance plans that are more generous than the minimum standard (for these people, premiums are expected to decline by more than 50 percent). But this calculation distorts the “average.” In fact, survey data suggests that less than 10 percent of people not receiving subsidies in the exchange would have to buy more generous coverage than they currently own. (And to be clear all existing plans are grandfathered under the legislation.) But because many of these people have coverage that will not protect them when they need it the most, they too will be getting a deal under reform. CBO finds that a 30 percent increase in the generosity in coverage -- changes that will protect them from medical bankruptcy and pre-existing condition exclusions -- will only cost 10 percent more on net on average. Further, CBO does not mention the impact of the “young adult” plan included in reform (the basic plan available to people under 30 or people for whom coverage is deemed "unaffordable"). That provides another low-cost option for many Americans. 

Remember, CBO is by nature conservative, and many experts, including myself, believe that the new rules and increased competition in the new insurance marketplace will reduce premiums even more. But these latest projections from CBO certainly prove Congress is on the right track.