The House-passed bill’s effects on health insurance coverage

The House-passed bill’s effects on health insurance coverage

Saturday the Chief Actuary of Medicare & Medicaid, Rick Foster, released his estimate of the effects of the House-passed health care reform bill. His memo shows how H.R. 3962 would affect the number of people with different types of health insurance in the year 2019. I made a picture of the most interesting effects, grouping the newly covered people into private coverage vs. government coverage. As always, you can click on the graph for a larger version.

You can see that the largest effects of the House-passed bill on insurance coverage are:

  • The bill would mean almost 30 M new people in government-run insurance, more than four times as many as would be newly insured through private coverage.
  • By far the largest effect of the bill would be to enroll more than 23 M new people in two existing government programs, Medicaid and S-CHIP. Medicaid is today widely regarded as fiscally unsustainable before adding more people.
  • Foster estimates that 18 M people would remain uninsured and have to pay the penalty tax. These people are clearly worse off than they would be under current law.

Here is Foster on the 18 M uninsured:

For the most part, these would be individuals with relatively low health care expenses for whom the individual or family insurance premium would be significantly in excess of the penalty and their anticipated health benefit value. In other cases, as appears to happen under current law, some people would not enroll in their employer plans (or take advantage of the Exchange opportunities) even though it would be in their best financial interest to do so. (p. 7)

These 18 M people relatively healthy people would remain uninsured and would pay a tax that is equal to the lesser of 2.5% of their income (a version of modified AGI) or the average health insurance premium.


Source: All data are from the 2019 column of Table 2 of Foster’s memo. The +4 M is the net of +18.6 M who would enroll in a private plan through an exchange, minus 14.6 M who would no longer fall in the “other private insurance” category, almost all of whom are people who today buy their insurance on the individual market.

(photo credit: Red Barchetta by gumdropgas)

19 responses

  1. Keith-

    I am frankly a little confused/surprised by this analysis. Two points:

    1) I would expect a net loss in employer sponsored insurance, since many employers would see the penalty for not paying insurance as cheaper than providing it.

    2) The authors point out that the "18M" people who willingly pay the tax in place of buying insurance are those "with relatively low health care expenses for whom the individual or family insurance premium would be significantly in excess of the penalty". But as people move out of employer-sponsored insurance, more folks will experience their true insurance bill, unsibsidized by the government. I think among those folks that earn too much to get significant governmental subsidy, they will figure out (over a relatively short window) that it is FAR cheaper to remain uninsured that to buy an unsubsidized policy. Do recall that about 20% of the folks in the US consume about 80-85% of the care costs each year. This means that about 80% of subscribers would do better each year by being insured. They could buy insurance when they need it (as they do in MA) and drop it immediately thereafter.

    It is reasonable to expect that over a short window, many folks will figure out the implications of #2. And I would expect that the thousands of financial advisers in the country (and a long list of pundits) will be quick to figure this out, and to publicize the rationale.

    Isn't there a credible argument that the net uninsured will actually rise (and significantly) and that the remaining uninsured will see premiums rise (significantly) as a result?

    TSB

    • "1) I would expect a net loss in employer sponsored insurance, since many employers would see the penalty for not paying insurance as cheaper than providing it. "

      It depends on whether the employer is competing with other employers who do offer health insurance.

      • Make up the difference in a cash wage. I know economically it is probably a wash, but for many workers the extra gross and "take home" will appear a better deal.

        Plus we are likely in a period of slow employment growth for a long time so the supply/demand curve will favor the employer.

        My prediction is the only people getting private healthcare in ten years, if this bill passes, will be unions and government workers and a small cadre of executives (although the latter could be restricted the under current pay czar trajectory)/

    • "I think among those folks that earn too much to get significant governmental subsidy, they will figure out (over a relatively short window) that it is FAR cheaper to remain uninsured that to buy an unsubsidized policy."
      Health insurance is purchased to reduce personal risk in the future. If the cost of a comprehensive policy with low deductibles and low co-pays increases under reform then those who are risk averse will gravitate toward less generous plans and purchase more catastrophic coverage with high deductibles unless the government bans these plans. There have been several recent reports that those who have the riskiest behavior tend to remain uninsured. This means that insurers face a much reduced risk of adverse selection. If this turns out to be true then health insurance underwriting will reflect this reduced risk in lower premiums. If on the other hand if the government succeeds in pushing these risk loving persons into private plans then these insurers will potentially experience higher loss ratios and future premiums might rise at a faster rate.

      • The risk-taking uninsured are already being supported by public expenditure, as they show up at emergency rooms, who are required to treat them. This is a major reason hospitals have been closing, and that trauma centers are far fewer in number than before. If these people choose not to buy insurance, at last they'll be forced to pay for the public plan (or 2.5% of income, if lower), so they bear some explicit cost personally. This has to reduce the costs to others. If it benefits hospitals, for example, this reduces the charges other hospital users must pay to keep the doors open.

        In other words, they might sign up for insurance, which raises insurer's outlays…but the outlays could go for preventive or doctor's office care, instead of to very expensive emergency room care, which we all pay for, like it or not.

  2. So to summarize with a finer point. The house bill is a giant mandate, only partially funded. Of the 6.5MM increase in private plans, 2.5MM is employer provided (a totally unfunded mandate). I haven't read the report but one wonders what the economic impact is on those 2.5MM people in terms of wages. It's likely that wages decline from standard but in any event, the cost of insurance is not borne by the government.

    Then we have the 6.5MM people in the public option. Their insurance is subsidized by, but not paid for, by the government. Thus, they face an only partially funded mandate.

    The 23.5 MM people in Medicaid and SCHIP is another partially funded mandate since much of the costs there will be borne by the states (blissfully excluded from CBO scoring).

    And finally, as Keith points out, the remaining uninsured, face a nice penalty with no benefit (except to the government). So as I do the math, 24 to 28 million people will be paying more under the House plan (depending on what happens to the wages of the 4 million who now get provider coverage). In addition, the states will get a nice partially funded mandate for the 23.5MM people in Medicaid and SCHIP. Maybe someone should do the math on the real cost here.

  3. Keith,
    Is the picture of the Barchetta an indication of speed of passage or one of those risk loving uninsured that Pelosi wants to insure? Or are you a Rush fan?

  4. Keith – You do a great service, but here's bit I disagree with in this post.

    "Foster estimates that 18 M people would remain uninsured and have to pay the penalty tax. These people are clearly worse off than they would be under current law."

    Not clear. Since the bill outlaws pre-conditions testing some of these uninsured will be choosing to pay the penalty with the view to buying insurance when they get sick. Some of these will be people who are currently buying insurance.

  5. This also assumes the undocumented remain undocumented. Unlikely under Obama and the Democrats. And the 5M number seems to low by a factor of 4x or 5x over the period.

  6. Pingback: Global Policy Memo » Incremental Effect of H.R. 3962 on Health Insurance Coverage

  7. In 2019 we expect to have only 5 million undocumented aliens? Or does the House bill cover 15 million plus undocumented aliens? Under the equal protection laws it will have to! More benefits to those who do not pay taxes…hmmm

  8. Pingback: The 18 Million - Ross Douthat Blog - NYTimes.com

  9. Pingback: The 18 Million - Ross Douthat Blog - NYTimes.com

  10. The easiest solution to better life expectancies is to tax tobacco, alcohol, and unhealthy foods totally out of the market.

  11. Pingback: E.D. Kain - American Tory – An alternative to the current healthcare bill: part I - True/Slant

  12. Pingback: Pelosicare Would Vastly Expand Government, Penalize Millions | All That Is Necessary...

  13. Pingback: From KeithHenessey.Com: ‘The House-Passed Bill¬ís Effects On Health Insurance Coverage’ « Chris Navin

  14. I really enjoyed the article. Its always nice when you read something that is not only informative but entertaining. Outstanding, Annie Brown @ Flyttst

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