Wednesday, December 2, 2009

More on CBO premium report

The report on the effect of the Senate bill on private insurance premiums released by CBO on Nov. 30 is a comprehensive report with lots of information. It seems as though its major findings are allaying some fears of the moderates like Landrieu and Lieberman. The basics of what CBO found are, that as of 2016 as compared to no reform:

*160 people with employer based insurance today would have slightly lower premiums in 2016 (from negligible to 3% reduction). To be sure this is better than premiums going up 3% over the status quo....but it is important to remember that the status quo (no reform) is essentially a doubling of premiums over the next decade. Much more needs to be done on the cost control front.
*14 Million in indivdiual purchase market today, premiums for individual market policy in 2016 would be 10-13% higher....but that the policy coverage that would be obtained would be more generous. Meaning covering more things, and having a higher actuarial value....the percent of costs that insurance pays v. out of pocket payments for a representative group of patients.

In 2016, there will be 32 Million in the individual purchase market. 23 Million of these will be in the exchanges, and 18 Million of this 23 Million will get a subsidy to purchase insurance (5 Million will get no subsidy, and 9 Million purchasing individual cover outside of exchanges will also not get subsidy). So, the 10-13% higher premium is the true cost of the insurance. Around 6 in 10 of persons in indivdiual market will get subsidy so THEIR COST will be a lot less than it would be without reform, and the subsidies defray the cost of cover. The subsidies are expensive and that is the major outlay of the bill....and that is what the increased taxes and cuts to Medicare offset. In 2016 with no refrom we will have 52 Million uninsured; if Senate bill becomes law we will have 23 Million.

There is some sorting amongst types of insurance as follows by 2016 (non elderly).
Exchanges +23 Million
Medicaid +14 Million
Employer -4 Million
Other -5 Million (mostly perm disabled, ESRD covered by Medicare; Update: actually this is mostly non group people who CBO is saying would have had priv non group policy with no bill who now will buy via exchange.)

The subsidies go something like this:
below 133% poverty, cover via Medicaid
150-200 poverty, [$20,600 individual, $42,000, midpoint of income range] the max you can spend on premium is 4.7% to 6.5%, and the share of premium paid by the subsidy is 77% for individual, 83% for family.

350-400% poverty [$44,200 individual, $90,100, midpoint of income range] max you can spend on premium is 10.2%, with share of premium paid by subsidy being 13% for individual, 35% family.

Like with all means tested programs, there is quite a perverse incentive right at the point when subsidy goes away....for family cover income of $102,100+ in 2016 gets 0 premium support, whereas $90,100 gets 35% of premium paid. You can raise the trigger point, but you just raise the point of the perverse incentive.

Given that you have concluded that doing something to address the uninsured rate is important, and then concluded that you were going to stick with an employer based system and try and put together insurance markets for individuals to purchase coverage, this is pretty good.

Politically, the most importatn thing that the CBO report says is that the 160 Million people with employer provided insurance will see small decreases (wrongly wrote increases here yesterday) in premiums, not large increases that many have been saying. The wavering moderates in the Senate will have to decide how bad they think the status quo really is.

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