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Good News (I Think) from the CBO

The Congressional Budget Office just released its analysis of how the Senate's health care reform bill will affect premiums in all markets

It's the first time CBO has performed such an analysis: In the past, CBO has predicted how much health care reform will cost the government or how it will affect premiums for some people who buy coverage inside the insurance exchanges. Now CBO is turning its attention to the question most Americans really want answered: How will reform affect what I pay for insurance?

It's a long report with a million caveats; I want to wait until I've spoken with more people to provide a lengthy analysis. But the basic message seems clear enough. And it's good news, as far as I can tell:

If you get insurance through a large employer, then your insurance premiums should stay roughly the same, with perhaps a very small decrease. Specifically, CBO predicts the effect will be somewhere between no change and a 3 percent reduction. So if you're a family that would have paid $20,300 for insurance in 2016, CBO would expect you to pay around $20,100 instead.

If you get insurance through a small employer, then, again, your insurance premiums should stay roughly the same, with perhaps an even smaller decrease. Here the range is a 1 percent increase and a 2 percent reduction. Instead of paying $19,300 in annual premiums, as the projections now suggest you'd owe in 2016, you'd probably pay $19,200.

If you get insurance on your own, then your premiums would probably go up, because you'd end up buying coverage that is more comprehensive. (Remember, the individual market typically offers far skimpier benefits than what's available through employers.) Overall, premiums for this part of the market would be expected to go up from $13,100 to $15,200. But--and this is the key point--newly available federal subsidies will more than offset this increase. In other words, the majority of people buying coverage on their own will be able to spend less money and, at the same time, get better insurance. So if you're a family buying coverage on your own, without an employer, and you qualify for federal subsidies, then you would be expected to pay less than $13,100 a year for health insurance--maybe a lot less if you were making, say, $30,000 a year and thus eligible for pretty generous subsidies.

These projections represent averages. The CBO expects considerable variation in each group, so that some people pay more and some people pay less. And, like all CBO projections, these are subject to both enormous uncertainty and CBO's particular set of assumptions.

But that last part is actually encouraging, because CBO tends to have very conservative (small "c") assumptions about the ability of government reforms to save money in the health care system. If measures like greater use of information technology and comparative effectiveness data are more successful than the CBO projects--and many experts believe they will be--premiums should come down even more.

Keep in mind, too, that CBO's numbers are for 2016. But many of the cost-saving measures in the bill aren't expected to yield savings until after that date. In other words, the savings in the future could be even larger.

We may not get to the point where reform, as currently written, delivers $2,500 in savings to the average American, as President Obama famously (and, perhaps, foolishly) promised on the campaign trail. But this analysis suggests reform can in fact deliver some savings--and that it certainly won't raise premiums, as so many conservative critics have predicted.

Given the myriad ways in which reform will make both the uninsured and insured more secure, that seems like a pretty good bargain.

Update: Igor Volsky breaks it down further, complete with an easy-to-read chart.