Friday, December 4, 2009

Friday News and Observer Column

looks at what happens to private insurance premiums if the Senate bill becomes law. Total premiums for employer based coverage (160 Million people today) will be slightly less (0-3%). The share a worker pays is determined by the benefits offered by their employer, today and under the Senate bill.

Total premiums for individual based policies (14 Million people so covered today) will go up, by 10-13%. The increase is mainly due to mandate benefits that will make individual purchase cover similar to employer based. In terms of changes in insurance, it goes like this:

In 2016
Ind. cover bought in exchange 23 Million
Medicaid expansion 14 Million
Employer based -5 Million
Nongroup/other -4 Million (incl. some Medicare ESRD/perm disabled, but mostly shift from indivdiual purchase outside exchange to purchase in exchange).

Net increase in insured 28 Million
Still uninsured 23 Million (includes illegal immigrants)

If you want more details, see CBO report of Nov. 18, 2009, in particular Table 3 which shows flows across coverage categories from 2010 to 2019.

The CBO report of Nov. 30, 2009 on premiums is quite complex, detailed and well done. The full report is here. Of particular importance is table 1, which details not only total effect on premiums but how different aspects affect premiums (for example, mandating benefit package increases premiums for individual purchase, but indivdiual mandate that brings in younger, healthier people has a decreasing effect; the net in the individual purchase market is up by 10-13%). There are detailed assessments of how the subsidies work in this report that cannot be covered in a 700 word newspaper column.

The key for me is that the TOTAL PREMIUM for individual purchase is up. The INDIVIDUAL SHARE of this depends on your income (Table 2 has the details). About 6 in 10 of the 32 Million purchasing indivdiual policies (18 of the 23 Million buying in exchanges) will get a subsidy that averages two-thirds of total cost. The 9 Million still purchasing individual coverage outside of exchange will not get subsidy. Around $350 Billion of the $850 Billion in outlays of the Senate bill are for premium subsidy and setting up exchanges. Around $375 Billion of the outlays are for Medicaid expansions. Around $120 Billion is for reinsurance and risk adjustment. These expenditures are offset by Medicare cuts and higher taxes...CBO says net effect is reducing deficit by $130 Billion over 2010-2019.

The primary reason that premiums are down slightly for 160 Million people now covered in employer based is due to competition spurred by exchanges. CBO's analysis did not include the effect of small business tax credits on people covered by small employers....that would further reduce premiums share for the approx. 1 in 10 persons with employer cover in businesses with less than 50 persons.

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