• Reader Questions – Doesn't the Republican Bill Reduce Costs?

    I’m getting a lot of emails about the Republican health care bill.  Many are saying I’m being unfair.  A surprising number are pointing me to this press release from John Boehner:

    In a letter delivered tonight, CBO estimated that the GOP health care plan would reduce average private health insurance premiums per enrollee in the United States relative to what they would be under current law.  Specifically:

    •    For the small group market (generally businesses with 2 to 50 employees), the GOP plan would reduce premiums in 2016 for example by up to 10 percent.
    •    For the individual market, the GOP plan would reduce premiums in 2016 by up to eight percent.
    •    For the large group market, the GOP plan would reduce premiums in 2016 by up to three percent.

    Can we first agree never again to use press releases from politicians as evidence in an argument? Please?

    Let’s address the points anyway, as they provide a good lesson on the difference between the cost of insurance and the cost of care.  I am not quibbling that the GOP bill may bring down the cost of insurance for the Average American.  I can do that easily.  If we kick everyone who is sick out of the risk pool, then insurance becomes very cheap.  Go read this.  After all, insurance for healthy people is cheap!  The problem in America is that if you’re not healthy and actually need care, insurance is very expensive.  So how does the Republican plan lower the costs?  The CBO tells us:

    The first source encompasses factors that affect an “apples-to-apples” comparison of the average price of equivalent insurance coverage for an equivalent population under the amendment and under current law. Provisions in the amendment that belong in this category include the medical malpractice reforms and the requirements for administrative simplification assigned to the Secretary of HHS. Those changes would reduce spending related to the delivery of health care services and would thereby reduce health insurance premiums without substantially changing the amount of coverage provided or the mix of enrollees covered. Similarly, the amendment’s subsidies for reinsurance in the small group market would reduce the average premiums charged in that market because those subsidies would reduce the net costs that insurers incurred to provide that coverage.

    So the first way they get premium reductions is by malpractice reform.  That will lead to some reduced health care costs (less than $5 billion a year) from less defensive medicine.

    The second source of change in average insurance premiums is changes in the average extent of coverage purchased. Those changes can reflect both changes in the scope of insurance coverage—the benefits or services that are included—and changes in the share of costs for covered services paid by the insurer—known as the “actuarial value.” With other factors held equal, insurance policies that cover more benefits or services or have smaller copayments or deductibles have higher premiums, while policies that cover fewer benefits or services or have larger copayments or deductibles have lower premiums. Provisions in the amendment that would reduce insurance premiums by affecting the amount of coverage purchased include the State Innovations program, which would encourage states to reduce the number and extent of benefit mandates that they impose, and provisions that would allow individuals or affiliated groups to purchase insurance policies in other states that have less stringent mandates. CBO’s assessment was that the amendment would not have a substantial effect on actuarial values. However, that assessment represents an important source of uncertainty in this analysis of effects on premiums, because some of the savings from avoiding state mandates of benefits might be used to purchase coverage with a higher actuarial value.

    The second way premiums get reduced is by getting states to stop requiring insurance to pay so much.  In other words, the plans can require more out-of-pocket expenses.  This makes premiums less.

    The third source of change in average insurance premiums is changes in the characteristics of the people who are enrolled in different insurance pools. If relatively healthy people join an insurance pool, then the average insurance premiums for that pool would tend to decline; conversely, an influx of relatively unhealthy people would tend to raise premiums for that pool. For example, provisions in the amendment that promote the automatic enrollment of workers in health insurance and the coverage of dependents under age 26 in family policies would act to improve the average health status of both the small group and large group insurance markets and thereby reduce average premiums per enrollee in those markets.

    The third way is by allowing even more cherry-picking so that only healthy people get into insurance risk pools.  That makes premiums less.

    This really shows you why you need to read the full report.  Yes, Mr. Boehner can (in his press release) claim that the average premium will go down.  But that gets accomplished by (largely) increasing out-of-pocket costs and making things even harder for people with pre-existing conditions.  This is not health care reform.  It’s making things worse.

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