One of the few numbers from the Congressional Budget Office analysis of their healthcare plan that Republicans have been eager to trumpet is this: Under their plan, individual market health-insurance premiums will be 10% lower on average than they would be under Obamacare by 2026.
This is a finding from the CBO report on the American Health Care Act, but it’s misleading.
The more relevant fact for consumers is this: For a given customer, buying a plan that provides a given level of benefits, premiums are expected to be on average 13% higher under the AHCA than under Obamacare, using the CBO’s assumptions about premiums overall.
That’s according to a new analysis from Brookings Institution scholars Matt Fielder and Loren Adler.
How can it be true that premiums would go down overall but up for a given plan for a typical person? It’s because the AHCA will change the health insurance market so the average person buying a plan in the individual market is younger, and is buying a stingier plan.
This chart from their report breaks it down:
The AHCA would allow insurers to sell less generous plans, paying for a smaller fraction of your actual healthcare expenses than the plans on the market today. As a result, the average plan sold under the AHCA would provide fewer benefits than if the law weren’t enacted.
It would also relax the limit on “age rating” — which is to say, it would allow insurers to charge the oldest customers five times more than the youngest customers, instead of the current three times.
And it would change the subsidies available for buying insurance. As a result, some young customers would be able to get a bare-bones insurance policy for free or close to it, while some older customers would face premiums of more than half their income.
As a result, the average insurance customer under the AHCA would be younger than under the ACA. And they would be buying less comprehensive insurance. Given that, it’s no surprise the average premium would be lower: Insurers would be paying out a lot less in claims per participant.
But when Fielder and Adler adjust the CBO estimates to get an apples-to-apples comparison — stripping out the effects of age and plan changes, and calculating the effect on premiums if participant pools and plan generosity were unchanged from under the ACA — they find the CBO model has premiums rising substantially as a result of the AHCA.
That 13% rise would be what matters to the average consumer: how much they will have to pay for a plan that provides a given set of benefits. It would be expected mostly because the AHCA would repeal the individual mandate and make other changes that give healthy people less of an incentive to buy insurance, Adler said.
As a result, the average insurance buyer of any given age would be sicker than under the ACA, and would tend to be more expensive to cover, requiring higher premiums.
That said, premiums for a given plan wouldn’t go up for every customer.
Adler and Fielder estimate that premiums for plans that cover 70% of healthcare costs (known as “silver plans” under Obamacare) would tend to fall a little bit under the AHCA for customers under age 39, because of the relaxed restrictions on age rating.
But many older customers would pay a lot more, leading to the overall average increase of 13%.
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