CBO: Senate's Health Care Reform Bill Would Cause Individual-Market Insurance Premiums to Rise

According to a report released by the Congressional Budget Office this morning, the average price of insurance premiums bought on the individual market—that is, premiums not purchased through employers—would go up by 10 to 13 percent in 2016 if Congress passed health care reform legislation now in the Senate. This tracks with state-level reform efforts, which have almost always coincided with spikes in individual insurance premiums.

Nevertheless, advocates of reform will—and indeed, already are—arguing that the report shows that the bill will make health care both better and more affordable. How's that?

While average insurance premium prices on the individual market would rise, new subsidies would more than cover the cost increases for the majority of people purchasing plans on the individual market. According to the CBO's estimate, 57 percent of those purchasing insurance on the individual market would receive subsidies. Those subsidies would vary by the individual's income level, but according to the estimate, on average, the subsidies would be enough to make the cost of insurance less than under current law.

Basically, the argument is that, sure, insurance on the individual market will be more expensive, but taxpayers will pick up the tab for the increased costs. This strikes me as a less-than-compelling defense of reform.

For one thing, it doesn't account for the fact that many people would be required to buy insurance that they wouldn't purchase otherwise. Even if the average premium price across the nation goes down for those getting subsidies, many individuals will be forced by the bill's mandate to buy insurance that they wouldn't have otherwise bought. For those people, the price of buying even subsidized insurance will be significantly higher than what they'd have chosen to do otherwise—not purchase insurance at all. And for many others, the price of buying even that subsidized insurance will be high enough that they'll choose to pay a fine in order to opt out instead. So, despite the subsidies, lots of people will pay quite a bit more than they do now, whether it's to get insurance that they otherwise would've chosen not to, or whether it's to avoid getting insurance at all.

Nor does this help those don't get subsidies. Nearly half—43 percent, according to the CBO—won't get any subsidies for their insurance. And for those people, double-digit percentage increases in insurance premiums (compared to what prices would be under current law) won't be affordable at all, especially for those who would've chosen not to purchase insurance otherwise.

Given the sky-high overall cost of the bill, and the recent report by the Center for Medicare and Medicaid Services confirming that the legislation won't reduce overall medical spending, this doesn't exactly strike me as a model of affordability.

I've got a longish feature on the CBO in the new issue of the print edition; you can read my past posts on the CBO's health care reports here, here, and here.