CBO: ObamaCare will drive insurance premiums higher

posted at 3:30 pm on November 30, 2009 by Ed Morrissey

And that’s bad news for the 83% of Americans who won’t buy their health insurance through an “exchange.”  The CBO report stresses that the increase in premiums will be offset by subsidies for those who qualify, but that means that American taxpayers will be footing the bill for the increase.  The report also calls into question — again — one of the primary funding mechanisms for ObamaCare:

Individual insurance premiums would increase by an average of 10 percent or more, according to an analysis of the Senate healthcare bill.

The long-awaited report by the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) also concluded that subsidies provided by the legislation would make coverage cheaper for those who qualify. …

Though Republicans will seize on the projections that insurance premiums for individuals would increase, Democrats will highlight the conclusion that the legislation would lower premiums by 56 to 59 percent for those individuals who would receive subsidies to buy insurance on the exchange created by the legislation. Of those who participate in the exchange, 57 percent would be eligible for subsidies. The subsidy would cover about two-thirds of their premiums, the report says.

This exchange, open to individuals and small-business employees, would provide coverage to just 17 percent of the marketplace, the report notes.

But this may be the most significant part of the report, and it comes at the end of The Hill’s report:

The analysis does not measure the effects on premiums of a proposed excise tax on the most expensive insurance plans. Consistent with their previous reports, the CBO and the JCT predict that most people who currently have so-called Cadillac insurance plans would opt for less expensive insurance to avoid the tax.

Why is this so significant?  The Senate plan envisioned a $259 billion revenue stream from this tax in the first decade.  As I argued at the time, this static tax analysis would be proven dead wrong and leave a huge hole in the funding of ObamaCare.  The CBO and the JCT apparently agree.

As far as the insurance premiums go, this is yet another example of ObamaCare bending the cost curve … upward.  Why will premiums increase?  Guaranteed issue and expansion of third-party payer services.  Instead of exercising cost control through real reform, the new plan will intensify the existing structural problems of cost in the American health-care system.  And since the covered won’t be paying that cost themselves, the rest of the taxpayers who don’t participate in the exchange system will be left with the bill through the federal subsidy program.


Related Posts:

Breaking on Hot Air