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.