Pres. Obama's Health Care Plan: A Premium On Accurate Information
As our year long debate on health care comes to a close there’s a lot of misinformation flying around. Case in point: a recent headline suggesting that health premiums would increase under the President’s health care plan. The suggestion of this article was that maybe Americans would be better off and end up paying less if we ditch reform just continue to do nothing.
In fact, the opposite is true. Most people would pay less—in many cases a lot less. Let’s look at why:
In the absence of reform, health premiums are expected to continue skyrocketing. Those 20, 30 and 40% increases that you’ve heard about lately – they’ll be the rule not the exception.
The real question, then, is whether the President’s plan would lower the cost of premiums from what they would be or increase them. Here, we don’t have to rely on hearsay or news articles – the Congressional Budget Office has offered its official view on the question.
According to the CBO, Americans buying the same coverage they have today in the individual market will see premiums fall by 14 to 20 percent compared to what they would pay without health insurance reform. This results from two important things that reform will do:
* First: The President’s Proposal introduces greater competition in the insurance market by establishing state-based exchanges where insurers will need to compete for business. In addition, the proposal streamlines administrative costs by standardized forms and reducing the paperwork burden of providers.
CBO assumes that competition and administrative savings in the reformed market will generate significant savings, which will reduce average premiums for a comparable package of benefits by 7 to 10 percent compared to the cost of such benefits without reform in the individual market.
* Second: As a result of insurance market reforms that will be in place in the individual market and because of the individual responsibility requirement for coverage, CBO assumes that millions more people will have access to the individual market. According to the CBO, the impact of bringing these new people – many of whom are younger and healthier – into the market will help reduce premiums by 7 to 10 percent in the individual market.
But wait, maybe you’ve heard opponents saying that CBO actually found that premiums would go up? Again, the facts matter here.
The CBO assumes that under President Obama's Proposal individuals purchasing coverage in the reformed individual market will have access to a wider range of health benefits than they have in today’s individual market. So people may choose to buy better coverage. Some may pay more because they are getting more for their money.
And let’s not forget that the President’s plan includes the largest middle class tax cut for health insurance in our nation’s history. Critics also fail to point out that the majority of people purchasing coverage in the individual market will receive tax credits that on average will cover two-thirds of their premium.
Once the impact of these new tax credits are taken into account, many people in the individual market could see their premiums drop by almost 60 percent compared to what they would have paid without health insurance reform.
Dan Pfeiffer is White House Communications Director
FACT CHECK: Obama Plan Only Slows Premiums Rise
Buyers, beware: President Barack Obama says his health care overhaul will lower premiums by double digits, but check the fine print.
Premiums are likely to keep going up even if the health care bill passes, experts say. If cost controls work as advertised, annual increases would level off with time. But don't look for a rollback. Instead, the main reason premiums would be more affordable is that new government tax credits would help millions of people who can't afford the cost now.
Listening to Obama pitch his plan, you might not realize that's how it works.
Visiting a Cleveland suburb this week, the president described how individuals and small businesses will be able to buy coverage in a new kind of health insurance marketplace, gaining the same strength in numbers that federal employees have.
"You'll be able to buy in, or a small business will be able to buy into this pool," Obama said. "And that will lower rates, it's estimated, by up to 14 to 20 percent over what you're currently getting. That's money out of pocket."
And that's not all.
Obama asked his audience for a show of hands from people with employer-provided coverage, what most Americans have.
"Your employer, it's estimated, would see premiums fall by as much as 3,000 percent," said the president, "which means they could give you a raise."
A White House press spokesman later said the president misspoke; he had meant to say annual premiums would drop by $3,000.
It could be a long wait.
"There's no question premiums are still going to keep going up," said Larry Levitt of the Kaiser Family Foundation, a research clearinghouse on the health care system. "There are pieces of reform that will hopefully keep them from going up as fast. But it would be miraculous if premiums actually went down relative to where they are today."
The statistics Obama based his claims on come from two sources. In both cases, caveats got left out.
A report for the Business Roundtable, an association of big company CEOs, was the source for the claim that employers could save $3,000 per worker on health care costs, the White House said.
Issued in November, the report looked generally at proposals that Democrats were considering to curb health care costs, concluding they had the potential to significantly reduce future increases.
But the analysis didn't consider specific legislation, much less the final language being tweaked this week. It's unclear to what degree the bill that the House is expected to vote on within days would reduce costs for employers.
An analysis by the Congressional Budget Office of earlier Senate legislation suggested savings could be fairly modest.
It found that large employers would see premium savings of at most 3 percent in 2016, compared with what their costs would have been without the legislation. That would be more like a few hundred dollars instead of several thousand.
The claim that people buying coverage individually would save 14 percent to 20 percent comes from the same budget office report, prepared in November for Sen. Evan Bayh, D-Ind. But the presidential sound bite fails to convey the full picture.
The budget office concluded that premiums for people buying their own coverage would go up by an average of 10 percent to 13 percent, compared with the levels they'd reach without the legislation. That's mainly because policies in the individual insurance market would provide more comprehensive benefits than they do today.
For most households, those added costs would be more than offset by the tax credits provided under the bill, and they would pay significantly less than they have to now. However, the budget office estimated that about 4 in 10 customers shopping for an individual policy would not be eligible for tax credits — and would face higher premiums on average than without the legislation.
The premium reduction of 14 percent to 20 percent that Obama often cites would apply only to a portion of the people buying coverage on their own — those who want to keep the skimpier kinds of policies available today.
Their costs would go down because more young people would be joining the risk pool and because insurance company overhead costs would be lower in the more efficient system Obama wants to create.
The president usually alludes to that distinction in his health care stump speech, saying the savings would accrue to those people who continue to buy "comparable" coverage to what they have today.
But many of his listeners may not pick up on it.
"People are likely to not buy the same low-value policies they are buying now," said health economist Len Nichols of George Mason University. "If they did buy the same value plans ... the premium would be lower than it is now. This makes the White House statement true. But is it possibly misleading for some people? Sure."
CBO Confirms Families Will Save Money Under Health Reform
Today, the Congressional Budget Office (CBO) released an analysis (pdf) of the Senate version health insurance reform – and it contains more good news about what reform will mean for families struggling to keep up with skyrocketing premiums under the broken status quo.
Like other recent analyses, the CBO report finds that lower administrative costs, increased competition, and better pooling for risk will mean lower premiums for American families. Among the findings:
* Americans buying comparable health plans to what they have today in the individual market would see premiums fall by 14 to 20 percent.
* Those who get coverage through their employer today will likely see a decrease in premiums as well.
* And Americans who currently struggle to find coverage would see lower premiums because more people will be covered.
In addition to the welcome relief on costs, the CBO reports that Americans will also have better insurance options. The CBO assumes that many people will take advantage of these better options and "buy up" to purchase better plans than are currently offered in the individual market.
Not surprisingly, some of reform's opponents have already started trying to distort that finding to make false claims that reform will raise costs. So let's be clear: where the CBO does see premiums rising, it's not because Americans are paying more for the same coverage – it's that they’re making a choice to purchase better plans that weren't previously available to them.
In keeping with that finding, the CBO affirms the effectiveness of the grandfather policy, which will allow you to keep what you have if you like it. The report reads, "Moreover, if they wanted to, current policyholders in the nongroup market would be allowed to keep their policy with no changes, and the premiums for those policies would probably not differ substantially from current-law levels."
Finally, it’s worth nothing that for all the good news in the CBO report, the analysis doesn't even take into account all of the bill’s measures to control costs and improve coverage. So if anything, it understates the positive impacts of reform. For example, the CBO does not take into account policies like the catastrophic option available to young adults, and reinsurance provision, that would reduce premiums even further.
It also does not incorporate potential effects of the proposal on the level or growth rate of spending for health care. For instance, CBO’s analysis does not fully capture the effects of the excise tax on high-cost plans, which will bend the cost curve over the long-term. But it did provide a snapshot: for plans affected by the tax in 2016, premiums would be 9-12 percent lower than under current law.
Sources: Whitehouse.gov, C-Span, CBO, Yahoo News, Youtube
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