December 3, 2009

December 3, 2009 | Commentary on Health Care

You Will Pay More

The Congressional Budget Office had more bad news on Sen. Majority Leader Harry Reid's health-care bill this week -- even if some media outlets missed it.

CBO not only found that Reid's "reform" would hike premiums for millions of Americans who buy insurance in the non-group market, it noted other significant changes Reid would impose on the policies now held by millions more.

CBO predicts that 6.4 million people who now get insurance through their employer will lose that coverage and buy insurance on the non-group market: The bill would push many employers who have older or sicker workers to simply end their existing insurance plan, forcing these workers into the non-group market. Other older workers might be enticed into the non-group market because the rates will initially seem cheaper.

The New York Times and others hyped the CBO finding that Reid's plan wouldn't cause premium increases for large-group plans. But a chief reason CBO cited for that finding is that, as Reid forces older and sicker workers into the non-group market, many younger workers will be buying into that group coverage. Since this insurance "pool" will thus be covering people who need less care, its rates could actually drop -- except that other portions of Reid's plan would be likely to push the prices right back up.

And, again, millions who now get coverage this way would be forced out of the "pool."

CBO was very clear that Reid's bill would force up costs in the non-group market. Premiums for a family plan in the non-group market would shoot up some 16 percent a year for some families, CBO found.

The biggest losers would be the younger, healthier people who get insurance in the non-group market: Their premiums would rise because Reid's regulations would force them to subsidize that influx of older, sicker people that his "reform" drives out of the group market.

Actually, those taking the biggest hit would be the 10.5 million people that Reid would push and cajole into buying insurance to avoid paying a fine. These are mostly younger, healthier people who don't now think health insurance is a good deal for them. Reid would not only push them into buying insurance, he'd have them pay more to help subsidize those older, sicker folks being pushed into the non-group market.

Note, too, that Reid requires people to buy into government-approved plans that will include benefits people may not want to pay for. It's like forcing a basketball fan to buy Nets season tickets when he just wants to watch a single game when LeBron James comes to town.

Of course, CBO could be wrong -- younger people might opt to just pay the fine and not enter the non-group market. If they refuse to pay the subsidies Reid is counting on, the non-group pool would be older and sicker than average -- and premiums would quickly spiral out of control, turning that market into a disaster.

One more thing: CBO rightly notes that Reid is imposing new costs on all health plans -- "fees" that he's charging various medical providers that, as CBO notes, will inevitably be passed on to consumers via their insurance.

CBO generously assumes that various "efficiency" savings will offset some of these costs. But the value of those efficiency gains is more uncertain than CBO admits -- after all, if it was so easy to save money this way, private companies would already be doing it. If the gains don't materialize, many people who don't lose their existing group coverage thanks to Reid would still start seeing higher premiums.

Then there are folks targeted by Reid's 40 percent excise tax on "Cadillac" health plans. This tax would hit 30 million people its first year -- roughly a fifth of those who have group coverage now. And it's set to hit millions more with every year that passes -- because the cutoff for what counts as "Cadillac" is designed to not keep pace with health-care inflation.

No one knows how the tax will work out -- whether those it hits will wind up paying more, getting fewer benefits or some combination of the two. The CBO believes that different groups would be hit in vastly different ways. In some cases, it'll again prompt employers to cancel their insurance plans because their workers are high-cost -- dumping even more people into the non-group market.

Bottom line: The CBO report clearly shows that most Americans will wind up paying more for insurance if Reid's bill becomes law -- in many cases, a lot more.

Rea Hederman is assistant director of The Heritage Foundation's Center for Data Analysis.

About the Author

Rea S. Hederman, Jr. Director, Center for Data Analysis and Lazof Family Fellow
Center for Data Analysis

Related Issues: Health Care

First Appeared in the New York Post