Congressional Budget Office
An Analysis of Health Insurance Premiums Under the Patient Protection and Affordable Care Act
November 30, 2009
I don't trust the media to fairly tell me what is in it. You shouldn't, either. Go read it for yourself. And make up your own mind.
The report has a good summary of the changes envisioned, which follows.
"The proposal includes many provisions that would affect insurance premiums:
"New policies purchased from insurers individually (in the "nongroup" market) or purchased by small employers would have to meet several new requirements starting in 2014.
- Policies would have to cover a specified set of services and to have an "actuarial value" of at least 60 percent (meaning that the plan would, on average, pay that share of the costs of providing covered services to a representative set of enrollees).
- In addition, insurers would have to accept all applicants during an annual open-enrollment period, and insurers could not limit coverage for preexisting medical conditions. Moreover, premiums could not vary to reflect differences in enrollees’ health or use of services and could vary on the basis of an enrollee’s age only to a limited degree.
- could not impose lifetime limits on the total amount of services covered;
- could rescind coverage only for certain reasons;
- would have to cover certain preventive services with no cost sharing;
- and would have to allow unmarried dependents to be covered under their parents’ policies up to age 26.
"Those changes would also apply to new coverage provided by large employers, including firms that "self-insure"—meaning that the firm, rather than an insurer, bears the financial risk of providing coverage.
"However, current policies that had been purchased in any of those markets or that were offered by self-insured firms would be exempt from all of those changes if they were maintained continuously—that is, policies held since the date of enactment of the legislation would be "grandfathered." In addition, the proposal would:
- establish a mandate for most legal residents of the United States to obtain health insurance; set up insurance "exchanges" through which certain individuals and families could receive federal subsidies to substantially reduce the amount they would pay to purchase that coverage;
- make a public insurance plan available through those exchanges in certain states;
- penalize certain individuals if they did not obtain insurance coverage and penalize certain employers if their workers received subsidies through the exchanges;
- provide tax credits to certain small employers that offer coverage to their workers;
- significantly expand eligibility for Medicaid;
- substantially reduce the growth of Medicare’s payment rates for most services (relative to the growth rates projected under current law);
- levy an excise tax on insurance plans with relatively high premiums;
- impose fees on insurers and on manufacturers and importers of certain drugs and medical devices;
- and make various other changes to the federal tax code and to Medicare, Medicaid, and other federal programs.
"Each of those components of the legislation has the potential to affect the premiums that are charged for insurance, directly or indirectly; some would increase premiums, and others would decrease them."
At the top of the CBO page is this statement: The federal budget is on an unsustainable path, primarily because of the rising cost of health care and the aging of the U.S. population.
Projected Federal Spending Under One Fiscal Scenario
(Percentage of gross domestic product)
But I see little in the proposed legislation that would improve this situation. In fact, there is little to control the growth of Medicare and Medicaid at all, except the whim of a future Congress. And as history has shown, Congress has had little appetite for cutting Medicaid disbursements. By greatly expanding entitlements to Medicare and Medicaid, this proposal is likely to end in financial disaster.
Last year, during the campaign, I expressed interest in the proposals of Hillary Clinton. She advocated truly universal coverage and would have replaced Medicare and Medicaid with private insurance. Instead now, we are looking at a dramatic expansion of this expensive and unaffordable program. We will not be able to afford the program we have in place now, much less an expansion.
But because the legislation proposed that somehow, and in some way, a future Congress will endanger itself politically and cut those programs, the CBO is required to assume that it is true, and issues reports accordingly. This produces reassuring headlines, and placates the public.
Real reform would
- provide greater choices to people
- remove the involvement of the employer from health care insurance decisions,
- reduce government involvement,
- reduce overall costs,
- and actually cover everyone.
Three proposals discussed here at THE WHIG before would provide for these goals: Hillary Clinton's health care reform proposals, the Swiss (and Belgian) model of health care, and the Healthy Americans Act (which would give everyone the same health care coverage and choices members of Congress get).
The Health Care proposal before the Senate does not offer real reform.
- It does not cover everyone.
- It does not cut government expenditure.
- It does not separate insurance from a person's employer.
- It does not cut the growth of health costs.
- And it does not offer a realistic appraisal of how it will be paid.
As the abortion coverage debate shows, it now only does not provide greater individual decision making in health care, it now also involves the federal government in individual health insurance coverage! If anything, it seems to provide for the eventual collapse of the health insurance industry, one can only suppose because a complete take over is contemplated, or hoped for in the future. As much as I want health care reform, and to see universal coverage, this legislation is a move in the wrong direction.