The Congressional Budget Office (CBO) yesterday released a report: An Analysis of Health Insurance Premiums Under the Patient Protection and Affordable Care Act (pdf) that focuses on the impact the Senate healthcare bill would have on health insurance premiums. Specifically, the analysis examined the average effects of the Patient Protection and Affordable Care Act (H.R. 3590), as proposed by Senator Reid (D-Nev.), on premiums in 2016 for coverage purchased individually, coverage purchased by small employers, and coverage provided by large employers.

The report found that the average premium per person for new individual, or nongroup, policies would be about 10 to 13 percent higher in 2016 than under current law, without taking into account the subsidies that some of those individuals would receive. The report also concluded that, while the Senate healthcare bill would have a much smaller impact on insurance premiums for employment-based coverage relative to individually-purchased plans, an estimated 19 percent of workers with employment-based coverage would be effected by the bill’s 40 percent excise tax on high-premium insurance plans, known as “Cadillac” policies. Under the terms of the bill, beginning in 2013, the excise tax would apply to premiums exceeding $8,500 per year for individuals and $23,000 for families. After 2013, those amounts would be indexed to inflation plus 1 percent. The CBO estimates that employees who keep their high-premium plans would pay a higher premium – roughly the amount of the excise tax – than they would under current law. The CBO surmises, however, that many of these people would simply opt for a lower-premium plan. According to the report, insurance plans could achieve lower premiums “through some combination of greater cost sharing (which would lower premiums directly and also lower them indirectly by leading to less use of medical services), more stringent benefit management, or coverage of fewer services.” In addition, the CBO estimates that many employers would respond to the excise tax by offering policies with premiums at or below the threshold.

Excluding consideration of high-premium plans, the report found that participants in health plans sponsored by small employers (those with 50 or fewer workers) could see anywhere from a 1 percent rise to a 2 percent reduction in premium cost in 2016 relative to current law. Those enrolling in plans offered by large employers (those more than 50 workers) could see an average zero to 3 percent reduction in premium costs in 2016. As a caveat, the report stressed that there remains a great deal of uncertainty surrounding these estimates.

Photo credit: Andriy Solovyov