Congressional staffers last year had a pointed warning for policy makers and Americans who purchase employer-based health insurance. “Insurance premiums...are high and rising,” says a report released by the nonpartisan Congressional Budget Office in February 2016.
The average employment-based insurance plans cost individuals $6,400 in 2016, the report said, while families paid $15,500. Even under reforms that Obamacare brought, the CBO projected that employment-based premiums would keep rising, growing by 60 percent in 2025 if current growth trends continued. Personal incomes, on the other hand, would likely not keep up.
“High and rising premiums for private health insurance are a matter of concern for enrollees,” the CBO report said. “They also affect the federal budget, because the federal government subsidizes most premiums—directly or indirectly—at a cost of roughly $300 billion in fiscal year 2016.”
The Trump administration and the GOP-controlled House and Senate are now working on a plan to lower the impact that healthcare spending has on the federal budget. Viewed strictly through that lens, the House leadership’s American Health Care Act appears to offer an effective solution. The Congressional Budget Office says that the new health care act would reduce the federal deficit by $337 billion over the next nine years. But those savings would not be felt by many American consumers.
Millions expected to lose insurance
The CBO report, done in conjunction with Joint Committee on Taxation, has been eagerly anticipated by Democrats who have claimed that millions of people would lose health insurance should the Affordable Care Act be repealed. As anticipated, the CBO and JCT state in their report that in the next three years, 14 million more people would go uninsured under the proposed GOP law.
Some Republicans have countered that the only people losing health insurance would be those who did not want it, or the people who purchased health insurance to avoid paying the penalty imposed by Obamacare. To be sure, the CBO confirms that “some of those people would choose not to have insurance because they chose to be covered by insurance under current law only to avoid paying the penalties,” but that is not universal. “Some people would forgo insurance in response to higher premiums,” the report adds.
Cuts to Medicaid under the American Health Care act would throw even more people off insurance by 2020. By 2026, an estimated 24 million more people would be uninsured under the proposed legislation than would be under current law.
“The reductions...would stem in large part from changes in Medicaid enrollment— because some states would discontinue their expansion of eligibility, some states that would have expanded eligibility in the future would choose not to do so, and per-enrollee spending in the program would be capped,” the report says. In total, the budget office predicts that by 2026, 52 million people will be uninsured under the GOP’s plan, a significantly higher figure than the estimated 28 million people who would be uninsured by 2026 if the current law remains in effect.
Aside from making cuts to Medicaid and eliminating the penalty for people who do not purchase insurance, the proposed law would also give insurers leeway to charge older consumers more. Currently, federal law prevents insurers from charging older people premiums that are more than three times higher than premiums for younger people. The House leadership bill would relax this requirement, allowing “insurers to charge older people five times more than younger ones, beginning in 2018.”
By 2020, insurers would also no longer be required to offer plans that cover at least 60 percent of benefits. And instead of a penalty, people who forgo health care would still pay extra, but the money would go to their insurance provider. People who have been uninsured more than 63 days in the past year would have to pay a 30 percent surcharge on premiums, should they eventually decide to get a plan.
In total, the CBO and JCT still have somewhat good news for the average healthcare customer. Average premiums would increase in the next few years but begin decreasing in 2020. However, those trends likely would be felt across the country unevenly. Premiums, the CBO says, would substantially reduce among young adults but would rise for older customers.
“CBO and JCT estimate that changes in premiums relative to those under current law would differ significantly for people of different ages because of a change in age-rating rules,” the report says.
House Speaker Paul Ryan, the architect of the American Health Care Act, appears to be happy with the CBO’s findings and projections. “I’m excited by this analysis,” he recently said on Fox News. Like Ryan, other Republican lawmakers have focused on the report’s positive findings that the federal deficit would lower $337 billion and that the average premium would drop 10 percent by 2026, omitting some of the less appealing points also made in the CBO report.
“The CBO report shows that our bill lowers premiums by 10 percent by 2026, while increasing choice and creating a vibrant marketplace for consumers,” writes House Budget Committee Chairman Diane Black in a statement.
But other Republicans are criticizing the CBO’s findings, and the Trump administration is now dismissive of the entire agency. Tom Price, the secretary of Health and Human Services, told reporters that Republicans “disagree strenuously with the report that was put out...we believe our plan will cover more individuals at a lower cost and give them the choices that they want for the coverage that they want for themselves and for their family.”
Trump’s press secretary, meanwhile, asserted last week that “if you’re looking at the CBO for accuracy, you’re looking in the wrong place.” The head of Trump’s Management and Budget Office has similarly suggested that the CBO is not equipped to measure the impact of the legislation.
Americans pay more and get less
For years, the CBO has documented the problem of rising Medicaid costs, rising health insurance premiums that outpace income, and the failure of healthcare to improve health outcomes even after all the money that Americans fork over. The agency only calculates costs of various policies and does not make recommendations about how to fix these longtime problems, however.
Other reports have similarly found that Americans are paying too much for healthcare and not getting enough benefits in return. The Commonwealth Fund, a progressive think tank focused on healthcare policy, conducted an analysis in 2015 showing that the United States spent much more on health care than twelve other high-income countries. Unlike the United States, the twelve other countries in the report had universal, government-run health care. Despite that, an enormous amount of public money has been subsidizing care.
“Even though the U.S. is the only country without a publicly financed universal health system, it still spends more public dollars on health care than all but two of the other countries,” the Commonwealth Fund writes. “...despite its heavy investment in health care, the U.S. sees poorer results on several key health outcome measures such as life expectancy and the prevalence of chronic conditions.”