Health Reform Will Make Health Insurance More Expensive for Individuals

A new Congressional Budget Office (CBO) report finds that the Senate health reform bill will make insurance from 10% to 13% more expensive. That’s an extra $300 for an individual and $2,100 for a family by 2016. Still, the estimate is probably way too optimistic.

As Gene Steuerle pointed out the other day, over the course of a year more than one third of all workers suffer a bout of unemployment, leave the workforce, enter it, partially retire, move to part-time employment, get married, get divorced, have a child, or have a child leave home. And as my Health Alert pointed out, the bills before Congress have no mechanism for dealing with the problem of short-term uninsurance. Those losing coverage who are sick will quickly sign up for new insurance. Those who are healthy will wait until the next open enrollment period. And they may wait much longer.

As Steuerle notes, an individual mandate will be enforced based on two-year-old tax returns. Plus the fine for being uninsured is only $750, compared to a $5,200 premium. A little more than half the buyers (57%) in the new health insurance exchange will get subsidies but $750 may be cheaper than subsidized insurance for many of those.

In Massachusetts (with mandates and fines), individuals are enrolling, having their surgery, and then dropping out. And why not? That certainly makes financial sense. As previously noted, the national uninsurance rate is only a couple of points higher than the national uninsured drivers rate — even though auto liability insurance is mandatory in all but three states.

To the degree that sick people enroll, while healthy people disenroll or go bare, average premiums will have to rise even more. Massachusetts, for example, has the highest premiums in the country.

As for group health insurance, the report projects little change from the current path — with (2016) premiums reaching $7,300 (individual) and $20,100 (family). But this ignores the 40% tax on “Cadillac plans” that will hit one out of every five workers.

Comments (7)

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  1. Larry C. says:

    Of course premiums are going to go up. How could it be otherwise?

  2. Ken says:

    I agree that the CBO is underestimating the cost. The reason: they are underestimating the number of healthy people who are going to stay uninsured as long as they stay healthy.

  3. Brian W. says:

    As significant as the CBO analysis is, the Council for Affordable Health Insurance (CAHI) and others are warning that the Reid bill will make health insurance even more expensive than projected by the CBO.

    The CBO estimates are too low because they don’t account for an increase in demand, they don’t anticipate predictable consumer behavior (like jumping from plan to plan and in and out of the system because of health status), and they don’t account for cost shifting from the government imposed price controls on insurance prices.

  4. Bret says:

    Has anybody noticed how many media reports have distorted the message here? Costs are going to go up for people forced to buy their own insurance. People who get subsized may see their personal cost go down. But that is only because other people (in their role as taxpayers) are footing the bill.

    But the bottom line is, these reforms will increase the cost of health insurance.

  5. Devon Herrick says:

    What I find most offensive about the whole idea that everyone should be compelled to have insurance is the notion that the government gets to decide the type and amount of insurance people must have. A 22-year old male in Dallas County can get a $5,000 deductible, major medical (inpatient only) policy from Blue Cross of Texas for $384 per year. But the proposed legislation would require a 22-year old male to purchase a highly regulated policy that would likely cost close to $384 per month. How come the public has not picked up on this fact?

  6. […] obtained insurance anyway in a short period of time. Since there is no mechanism for dealing with short-term uninsurance and since there will be strong incentives for the healthy to drop out, the actual number may fall […]

  7. Pete Pettersen says:

    It is a real challenge when ideas, logic, facts and statistics mean nothing and such a major economic issue as health care reform, becomes 100% political!