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Reid Health Bill Raises Premiums
Posted By Rea Hederman On November 30, 2009 @ 5:20 pm In Obamacare | Comments Disabled
Today, the Congressional Budget Office (CBO) released a new report  detailing why individuals who purchase insurance in the non-group market would see much higher premiums in 2016 under Obamacare than they would under current law. On average, those in large-group employer-sponsored plans would see their premiums remain flat. But this is an average of two subgroups that hides major losses by millions of Americans: 1) employees with generous coverage would see benefits cut due to the tax on high-value plans, and 2) employees with pared-down plans would see their premiums increase due to increased coverage mandates and taxes on medical devices and insurers that would be passed on to employees.
CBO assumes that large group plans will shift some of their older, sicker workers to the non-group market. Approximately one-fifth of the non-group market will consist of workers who formerly had insurance through their employer. This “crowding out” occurs as government subsidized plans displace private insurance. By shifting these high-cost workers to the non-group market, group plans can offset the higher taxes under Senator Reid’s plan and thus keep premiums flat for insurance purchasers.
CBO found that the largest effects are on the non-group market, approximately 17% of the entire health insurance market. Families that purchase non-group health insurance could pay up to 16% more than they would if the Reid Bill had not taken effect. CBO says that most of this increase is due to the new higher benefits mandated by the government. Premiums would also increase because of the older, sicker workers that lose their group coverage and are then added to the pool of non-group policyholders, thus increasing premiums for everyone in that group.
In contrast, CBO also found that due to the individual mandate, many younger, healthier people would now purchase insurance on the non-group market. About one-third of the non-group market in 2016 would be uninsured under current law. CBO considers these individuals to be much younger and healthier than the rest of the non-group market and would help offset other premium increases. CBO notes that these younger workers are forced to pay much more to pay for the health benefits of older workers.
The CBO’s study places a lot of emphasis on the mandates and penalties to force these younger workers to purchase health insurance. If they do not, then the non-group market would be a disaster as it would consist of people who would be sicker and older than average. As a consequence, they would face spiraling premiums to cover their additional costs.
The CBO also expects that one-fifth of health insurance plans on the group market would be subject to the excise tax of 40%. This is one of the highest tax rates on the books, even higher than the tax rate the richest Americans pay on their income. CBO estimates that more and more people would be forced to pay the excise tax over time due to the fact that health care premiums grows faster than Senator Reid’s exemption.
Article printed from The Foundry: Conservative Policy News Blog from The Heritage Foundation: http://blog.heritage.org
URL to article: http://blog.heritage.org/2009/11/30/reid-health-bill-raises-premiums/
URLs in this post:
 new report: http://www.cbo.gov/doc.cfm?index=10781&type=1
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