NCPA - National Center for Policy Analysis

PREMIUMS WOULD RISE UNDER OBAMA PLAN

March 18, 2010

President Obama says his health care overhaul will lower premiums by double digits, but check the fine print, says Ricardo Alonso-Zaldivar of the Associated Press. 

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 cover the cost for millions of people. 

A report for the Business Roundtable, an association of big company CEOs, issued in November, looked generally at proposals that Democrats were considering to curb health care costs: 

  • The researchers concluded that 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 (CBO) of earlier Senate legislation suggested savings could be fairly modest: 

  • Large employers would see premium savings of at most 3 percent compared with what their costs would have been without the legislation; that would be more like a few hundred dollars instead of several thousand, as the president suggests.
  • 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. 

Further: 

  • The premium reduction of 14 percent to 20 percent that President Obama cites would apply only to a portion of the people buying coverage on their own -- those who decide they 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 insurance company overhead costs would be lower in the system Obama wants to create. 

Source: Ricardo Alonso-Zaldivar, "Premiums would rise under Obama plan," Associated Press/Washington Examiner, March 17, 2010.

 

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