Many individuals and families would experience changes in premiums that differed from the changes in average premiums in their insurance market.2 As explained below, some provisions of the legislation would tend to decrease or increase the premiums paid by all insurance enrollees, while other provisions would tend to increase the premiums paid by healthier enrollees relative to those paid by less healthy enrollees or would tend to increase the premiums paid by younger enrollees relative to those paid by older enrollees. As a result, some individuals and families within each market would see changes in premiums that would be larger or smaller than, or be in the opposite direction of, the estimated average changes.
The good news is less healthy and older people would see savings in the health insurance coverage. Overall, government subsidies would lower the costs of many health insurance premiums. For nongroup primiums, people receiving would save 56 percent to 59 percent. The savings for small group primiums receiving subsidies is 8 percent to 11 percent. Savings from small group markets will be 1 percent to 4 percent.
A side effect of insurance companies no longer screening out people would be an administrative savings of 7 percent to 10 percent. Riders and medical underwriting would be elimanated from policies. Insurance companies would also be gaining new customers. Insurers would have to take all applicants and could not impose lifetime limits on what health insurance people can purchase. The study finds the government insurance exchanges would decrease costs. (The study doesn't explain how.) The exchanges would create competition between insurers. Translation: look for health insurers to spend more on marketing.
Small businesses with 50 or less employees will see no major cost changes in premiums. The study does not include numbers for tax credits for small businesses that provide health insurance.
Effects on Premiums for Employment-Based Plans Would be Much Smaller The legislation would impose the same minimum actuarial value for new policies in the small group market as in the nongroup market. That requirement would have a much smaller effect on premiums in the small group market, however, because the great majority of policies sold in that market under current law have an actuarial value of more than 60 percent. Essentially all large group plans have an actuarial value above 60 percent, so the effect on premiums in that market would be negligible. In sum, the greater actuarial value and broader scope of benefits in the legislation would increase the average premium per person in the small group market by about zero to 3 percent (with other factors held constant). Those requirements would have no significant effect on premiums in the large group market.
I like the idea of exchanges. It is time to create a free market and break up the private insurance monopoly. People can compare premiums and judge what bests suits their needs. The last thing the health insurance industry and Republicans want to do is break up the status quo.
The bad news is the Senate bill will not grant universal health coverage. The public option will only cover 3 million to 4 million Americans. Many will still lack health insurance.
A surprise is the Senate bill proposes a tax on pharmaceutical industry. The White House agreed with pharmaceutical companies to veto any bill allowing the Medicare to negotiate prices or import drugs from Canada. Look for the White House to pressure Reid to drop the drug tax.
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