There should be little change in health insurance premiums under the proposed Patient Protection and Affordable Care Act, according to the Congressional Budget Office.
The CBO and the staff of the Joint Committee on Taxation have analyzed how health insurance premiums might be affected by the act, an amendment in the nature of a substitute to H.R. 3590, as proposed by Senator Harry Reid, (D-Nev.) on Nov. 18.
The analysis looks separately at the effects on premiums for coverage purchased individually, coverage purchased by small employers and coverage provided by large employers. It also summarizes the effects of the proposal on the dollar cost of the average premium per policy (rather than per insured person) and presents those effects separately for individual and family policies in each market.
The consequences of the proposal on premiums would differ across insurance markets, according to research. The largest effects would be seen in the non-group market, which would grow in size under the proposal but still account for only 17 percent of the overall insurance market in 2016. The effects on premiums would be much smaller in the small group and large group markets, which would make up 13 percent and 70 percent of the total insurance market, respectively.
The analysis indicates that the legislation would have much smaller effects on premiums for employment-based coverage, which would account for about five-sixths of the total health insurance market. In the small group market, consisting of employers with 50 or fewer workers, the CBO and JCT estimate that the change in the average premium per person could range from an increase of 1 percent to a reduction of 2 percent in 2016.
In the large group market, consisting of employers with more than 50 workers, the legislation would yield an average premium per person that would be up to 3 percent lower in 2016. Those overall effects reflect the net impact of many relatively small changes, some of which would tend to increase premiums and some of which would tend to reduce them.
“The average premium per policy in the small group market would be in the vicinity of $7,800 for single policies and $19,200 for family policies under the proposal, compared with about $7,800 and $19,300 under current law,” the CBO and JCT estimate. “In the large group market, average premiums would be roughly $7,300 for single policies and $20,100 for family policies under the proposal, compared with about $7,400 and $20,300 under current law.”
As in the non-group market, the effects on premiums paid by individuals for coverage provided through their employer could vary significantly from the average effects on premiums, particularly in the small group market, the analysis said.
Some amendment provisions include:
- New policies purchased from insurers individually (in the “non-group” market) or purchased by small employers would have to meet several new requirements starting in 2014. They would have to cover a specified set of services and to have an “actuarial value” of at least 60 percent.
- Insurers would have to accept all applicants during an annual open-enrollment period, and insurers could not limit coverage for pre-existing medical conditions.
- 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.
A less extensive set of changes would be implemented more quickly and would continue in effect after 2013, according to officials. Among other changes, health insurance plans 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.
In addition, the analysis said that the proposal would establish a mandate for most legal residents of the United States to obtain health insurance and 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.