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CBO: Senate Health Care Bill Would Raise Premiums 10-13 Percent

By Philip Klein on 11.30.09 @ 12:41PM

In another blow to Democrats' health care claims, the Congressional Budget Office released an analysis on Monday projecting that the Senate health care bill would raise premiums by more than $2,000 on family policies compared to what the cost otherwise would be if Congress were simply to do nothing.

The report, prepared at the request of Sen. Evan Bayh, found that premiums on policies individuals purchase on their own or through the government-run exchanges would cost 10 percent to 13 percent more in 2016 than under current law. In dollar terms, in 2016 an individual policy would cost $5,800 and a family policy would cost $15,200 if the Senate bill were enacted, according to the CBO, compared with $5,500 and $13,100 under the status quo.

In an appearance on Fox News Sunday, Bayh, a moderate Democrat from Indiana, said that the CBO report would figure prominently in his decision making process as he evaluates whether he should support the legislation.

"I'm going to be looking at - and we haven't gotten the score from the CBO yet; they're about to give it to us - what does this do for the cost of insurance for people who currently have it," Bayh said. "We want to cover the uninsured, yes, but we don't want to do it in a way that's going to drive up the costs for folks who currently have it. That's one of the biggest complaints that I hear from people. So I'm going to be looking very carefully at what the bean counters have to say about that."

The major driver of the increased premium costs are the new mandates that will force insurers to offer more comprehensive coverage, and effectively bar individuals from purchasing less benefit rich insurance at a lower price.

The CBO said the legislation would have less of an affect on group coverage -- small employers may see their premiums go up 1 percent or down 2 percent, while larger employers could see no change, or see their premiums go down 3 percent.

From the start of the process, one of primary rationales President Obama has given for the urgent need to pass health care legislation is that the cost of premiums are skyrocketing, and putting more pressure on family budgets. In a speech to the American Medical Association in June, Obama declared that, "if we fail to act, premiums will climb higher." Now the CBO has estimated that if we do act -- at least in the way Democrats are proposing -- premiums will climb even higher than the unsustainable levels that supposedly prompted the drive for reform in the first place.

Earlier this month, the actuary at the Centers for Medicare and Medicaid Services found that the bill passed by the House would raise overall health care spending in the United States, despite pledges to the contrary.

UPDATE: TNR's Jonathan Cohn, via Twitter, asks why I didn't mention the federal subsidies that would more than offset the cost of the increased premiums for about 57 percent of those obtaining insurance on their own. The reason I didn't is that the subsidies do not change the underlying cost of the policies -- the only difference is that other taxpayers are picking up the rest of the higher tab. And 14 million Americans who earn too much to qualify for subsidies (the cutoff is $43,320 for individuals; $88,000 for a family of four) would see their premiums go up. The point is that when the health care push began, we were led to believe that legislation would reduce the economic burden of health care costs by lowering premiums and containing the growth of health care spending. But the current legislation does not accomplish that goal. If liberals still want to argue that helping more Americans obtain coverage is worth the costs, that's fine. But saying that government will subsidize the higher premium costs created by health care legislation is a far cry from boasting that reforming our health care system will lower the actual price of insurance.

With that said, rereading my post, I realize that the way I phrased things originally made it sound as if anybody purchasing insurance on their own would personally be paying more for insurance than under the status quo, and that wouldn't be the case for those receiving subsidies -- regardless of whether their costs are ultimately borne by others. I just went back and tweaked the language.

View all comments (31) | Leave a comment

Bob| 11.30.09 @ 1:10PM

There you go again, Philip, putting out the red meat for the uneducated bloggers at AmSpec. The vast majority of people in the U.S. have GROUP coverage, which would basically not be affected by the individual policies. Your title makes it sound like ALL premiums will go up 10-13%. Please give this to Fox News so they can misinform people even more.

As I've said before, I don't like this legislation because it will not significantly bring down health care costs -- and that is the major problem we face. But you just make the extreme righties look dumb with your overstatement.

If we are going to have a chance to return this country to fiscal discipline, those of us who are fiscal conservatives must tell the WHOLE TRUTH and not slant it. The truth about health care is on the side of fiscal conservatives. There is no reason to slant it just so you can get more readers.

This is why so many of us hate where the Republican party is going -- off of the deep end. Aren't there any adults on the right side? There certainly aren't any adults on the left.

Michael Ferrantino| 11.30.09 @ 1:28PM

I went to the CBO link and noticed the same thing as Bob. The CBO report actually gives negligible premium changes for the 70 percent of the population with group (employer-based) covereage. Their estimate of the 13 percent increase is for the 17 percent of people who they estimate will have individual (non-group) coverage.

I don't like the bill either because of the individual mandates, fines on people who don't want insurance, jiggering of actuarial tables to transfer premiums from old fat people like me to younger people who deserve cheap rates, etc. etc. But let's fix this claim, because it's not supported by the source document you cite.

John Smith| 11.30.09 @ 1:49PM

People don't have coverage because either their employer doesn't provide it and they can't afford buying it on there own, or their employer does provide it and they can't afford that.

So we are going to raise the premiums on individual coverage, including the public option, and at the same time, require everyone to have health insurance.

We're going to fine people who can't afford insurance on their own? Good plan.

HeyMoronBob| 11.30.09 @ 3:04PM

Hey Bob, anytime government gets involved in ANYTHING, costs go up, and up, and up. If you think that health care costs for 'group' coverage will go down or not change just because the nitwits at CBO say so, you are even a bigger fool than you have displayed thus far.

If you want fiscal discipline, GET THE GOVERNMENT OUT!! Get it out of medicine, get it out of retirement, get it out of education, get it out of Everything except the FEW roles/powers explicitely delineated in the Constitution.

Only THEN you will get your precious fiscal discipline.

Bob| 11.30.09 @ 4:03PM

Hey, Moron, I used to be in the group insurance business and the cost will remain the same or go down for group coverage because it will not change. The government is not in the group coverage business. In addition, if the government offers a public option, the private group coverage will also go down because private insurers will find a way not to cover the sickest among us.

Regarding fiscal discipline, the only way we will reduce health care costs is by increased competition and rationing. Now, the rationing is done by insurance companies, but it is not enough. People ought to be able to pay for the level of coverage they desire -- and if it doesn't cover them for things like cancer, they will die. That is called personal responsibility/liberty and it is the way we do things here in America. People generally want to pay nothing and get everything -- and that has to change.

Doug| 11.30.09 @ 4:13PM

Bob,

Bob, good word. I just read this blog, don't blog much myself. But yes, overseas costs go down for private insurers often because of public option.

Public option is also likely to employ insurance on the premise of medical equipment, practices, and patterns that have results based efficiency. Our health care is expensive because we expect to lead the world in R & D every year. Other nations' public optinos have brought competition IN TIME to the health care sector for this reason.

I don't think the health care bill is the solution, but I think it will be part of the solution and will fit well if we find ways to level the playing field and insurance companies monopoly of our health care sector (which destroys the relationship between consumer and supplier relationship, which is why prices are so out of hand in my opinion).

Isaac| 12.1.09 @ 4:43PM

I fail to see how employing a public option will increase competition; i.e. a competitor that owns the referees, can move the goalpost and change the rules in the middle of the game, and declare themselves the winner even if you beat them.

Public option will evolve into single payer. Barney Frank and any of the other leftists who are actually spearheading this legislation (not the ones who simply support it) admit that. It can only appear to add competition if your time horizon is less than 5 years and you ignore the heavier regulation/taxation that results. Fannie Mae/Freddie Mac/Sallie Mae/Citizen's Insurance in FL/SSI are examples of "public options."

Health Care Reform should be a state issue. Many states do it better than others, and we should follow the models that work. Unfortunately for the left, none of their models work for very long.

Free Markets are a good thing in the health care industry. We have progressed further and further away from that, and have allowed our states to be protectionists, and costs start to balloon, and many conclude government is the answer.

Thank you Bob, for the clarification - it does help to make sure that our facts are completely straight.

Isaac| 12.1.09 @ 4:45PM

Also, the "monopoly" issue is only present in specific states. Find out which ones and why.

joe| 11.30.09 @ 4:19PM

How does a public option that costs 10 to 13% more raise competition?

You'reStillAMoronBob| 11.30.09 @ 4:22PM

Wrong Answer Again, Bob. If the government mandates coverage for everything - WHICH IT WILL - and then undercuts the cost of private insurance with taxpayer subsidies - WHICH IT WILL - private insurance cost (group or individual ) will increase. In fact, BOB, private insurance for the masses will eventually disappear. You see BOB, the government doesn't play fair, doesn't have to compete with the private insurance market, doesn't have to make or profit, and makes up the rules as it goes. Most importantly BOB, the government can print money to cover for the billions in losses - just like the Post Office.

These idiot bills will raise the cost of EVERYTHING for EVERYONE. Your precious group policy holders will suffer too. In a few years they will be saying BUH BYE to their policies. ALL employers will dump their workers into the government plan. The only people who make out are the losers and moochers who pay no taxes. Oh wait, is that you Bob?

Bob| 11.30.09 @ 4:28PM

And you are even more of a moron, Moron. You state platitudes without analysis. You certainly have shown you don't understand employer based group health insurance. I can recommend a few good books on group health insurance if you really want to learn something before you get your GED.

Again, let me say I am against this legislation, but for legitimate reasons, not tea party idiocy.

bhy| 12.7.09 @ 7:19AM

HE COULDN'T PASS THE GED EXAM

Bob| 11.30.09 @ 4:33PM

Doug, this health care bill is NOT the solution as it will not bring down costs significantly. As long as people don't have to pay their own medical bills, you won't see a decline in costs. Besides, the anti-trust exemption will still be in place and competition will not be increased. In addition, we will not have tort reform.

I have proposed a consumer based solution where you have national health insurance companies competing without antitrust exemptions offering different levels of coverage. In addition, there is no tort reform. If you want a cheap plan, it won't cover everything, but that is just fine. If you want the best policy, you can pay for it.

The exception to this is that I do think the government should cover emergency and catastrophic care because we require hospitals to do the service. You cannot have an unfunded mandate here.

Greta| 11.30.09 @ 4:43PM

If one actually reads the entire CBO report, there is nothing in there indicating that there is any good news for anyone in regard to costs. Common sense indicates that with the new mandates, insurance costs will go up and keep in mind there are thousands of "shalls" in the bill and each can create more costs. If this bill is not stopped, healthcare costs will increase and the same people pushing this mess through will come back and say that the only solution is to give the government everything. THAT IS THE PLAN. Healthcare cost prior to Medicare and all the other government programs was abotu 5% of GDP. Medicare bill said adding these new insured would lower costs and the cost estimates were very low with limited deductions which have increased by the decade and it is still going broke. Their fix is to give more power and more people on government programs.
The fix can be found in the Republican plan. If taken in total, healthcare costs will lower dramatically and quality of care will go up with no government increase in size or costs. Lower costs will allow more to get coverage and pay for it.

Steve| 11.30.09 @ 4:46PM

Bob,

I do have a question regarding group coverage. If a public option is put into play, doesn't this provide an incentive to employers to dump the group coverage they offer to their employees as a way to cut costs? Wouldn't this increase costs to everyone over the medium and long-term as it kicks more people out of the employer-based group coverage which controls premium costs to some degree to the average employee of a medium-to-large company?

Bob| 11.30.09 @ 5:08PM

That is highly unlikely, Steve. Employers offer health coverage because they don't want to pay excessive salaries. If they drop the coverage, they will lose their best employees. Group health is a very competitive policy and costs are based on what we call a "group census". Company employees of a large company tend to be stable and in better health than the public in general, hence the lower rates.

All estimates of the public option have shown that to be higher in cost than private plans. That's because of something we call "adverse selection". Those who can't get coverage elsewhere will go to the public option. The "census" of the public option will be a group that is far less health than the employer group which is why it will cost a whole lot more.

What you've stated is a red herring put out by some Republicans who know nothing about insurance. That said, I see nothing positive about the current proposed legislation.

I would like to see us have an argument based on the facts, rather than the hyperbole you get on blogs like this. The Republican party would be far better off if they utilized knowledge rather than scare tactics and bizarre claims. We can no longer afford the current debt levels, and it doesn't take a right wing extremists to know that.

Jim O'Brien| 11.30.09 @ 8:34PM

The goal of Obama and his Socialists in Congress is to destroy private health insurance, so they are designing the legislation to make our premiums skyrocket. They correctly assume that the increased premiums will drive demand for socialized medicine.

RightKlik| 12.1.09 @ 3:00AM

Here are three take-home points for ObamaCare apologists:

1. Forcing young, healthy people to buy more insurance than they need at artificially inflated prices won't bring down the total cost of health care in this country. In fact, as a percentage of GDP, ObamaCare will increase health care spending faster than the status quo.

2. Money for health insurance subsidies won't come from thin air, and it won't come exclusively from "the wealthy."

3. The shell games aren't fooling most Americans (they're certainly not fooling most American voters).

Pecos Pete| 12.1.09 @ 7:24AM

If an organization's costs go down (thus profits increase) by terminating their group health insurance plan, then by gosh that's what will happen. And when it happens the employees will move to the public option.

The government's "penalty fine" for not providing health insurance will have to be adjusted constantly upward and organizations will have to really believe that they will be significantly penalized in order for them to continue providing health insurance for their employees.

Most organizations would love to be out of the health insurance business ... and the related union bargaining business for health insurance: "Aw shucks, if you don't like your insurance, call your congressman."

The unintended consequences from trying to manipulate human behavior can't be calculated.

JP| 12.1.09 @ 8:12AM

The Senate is already talking about injecting enough taxpayers money to be used as seed money to create this "public enterprise" known as the Public Option. And like other public co-opts (ie Fannie Mae, Freddie Mac), this one will not be allowed to fail. Certainly, private insurance firms should go to court citing constitutional questions (whether it is constitutional for a the federal government to compete against private firms in the insurance market).

If the public option cannot get private funds to capitalize itself enough to cover demand, there will of course be calls for more taxpayer's money. Our lawmakers will not allow a public insurance firm to fail. And no, salaries will not likely recover to offset the increases in premiums (this is very likely as the Senate and House versions both do not refuse even illegal aliens health care coverage). What is most likely is the employers will drop insurance coverage and pay the fines. The employees will then be put into the public option, and thier withholdings will likely be more than what their paying now (and the Senate has already set cielings as high $15,000/year for a couple that makes $100,000 a year). Out of pocket expenses and co-pays are also slated to increase ($4000 for singles making less than $60,000 and $7000 for couples making more than $100,000).

There is no way to get around it. And we haven't even touched Medicare cuts.

Jim O'Brien| 12.1.09 @ 8:33AM

New taxes on medical device providers, new taxes on pharma, new taxes on employer-sponsored plans, mandated co-pays and deductibles, insurers must take people with pre-existing conditions, and $500 billion cut from Medicare. Result? Medical care and medical insurance will be far more expensive for Everyone, except perhaps illegal immigrants and members of Congress.

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Brian Griffith| 3.5.10 @ 3:16PM

I actually read the CBO report and what is reported is accurate, but does put it out of context. First of all the premiums are as of 2016. Ask yourself if nothing is done and premiums rise at the current rate of 25 percent every four years you are looking at more than 10 - 13 percent increase. What is not reported is that the increase in premiums is due mainly to an increase in the amount of coverage. So if you kept the coverage the same there would be no increase or even a decrease in the next 6 years. So the actual analysis is an increase in coverage with less increase in premiums than would take place normally. Take my advice and read it for yourselves instead of depending on reporters and politicians to do it for you.

pricila| 4.24.10 @ 9:28AM

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Mhon| 5.6.10 @ 4:15AM

If this bill is not stopped, healthcare costs will increase and the same people pushing this mess through will come back and say that the only solution is to give the government everything.
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Sean| 6.8.10 @ 11:07AM

If we all just lost a little weight we could dramatically reduce our health care cost.

Howard Roark| 6.10.10 @ 1:39AM

Thing is that, government should not back away from severe issue like: Health. They have no right to hand over such essential and sensitive sector to money hungry private insurance company. Watch Micheal Moore's "Sicko" for more detail!