Senate Bill Will Increase Healthcare Premiums
At the request of BlueCross BlueShield, Oliver Wyman did a study of the Senate health care bill. Unsurprisingly, this study estimates that the bill will cost consumers quite a bit more than the CBO estimated.
John Goodman summarized the findings this way:
Premiums for individuals and families purchasing coverage on their own will go up 54%. Premiums for small businesses will go up 20%. Both numbers are over 5 years and both numbers exclude the impact of medical inflation.
I skimmed through the study and it looks pretty interesting. The study points out that reform won't work unless everyone is forced to purchase insurance.
The key implication of our analysis is simple: For these types of insurance reforms to be successful and sustainable, it is imperative to get broad participation. Young and healthy people need to be part of the insurance pool, and people cannot defer buying insurance until they are sick or at high risk. This is true no matter who is paying the premiums--individuals, employers, or the government.
The study then goes on to indicate that the current bill likely will allow people to free-ride, with bad results. They're basing their conclusions on several states' experiments with healthcare reform.
New York and Vermont: Average premiums in the individual market today are about 60% higher than the national average
New Jersey: Reform caused much higher premiums forcing thousands of individuals to drop coverage. The individual market decreased from 157,000 people in 1993 to 88,000 in 2007
Maine: Individual market enrollment in Maine dropped from 90,000 to 41,000 between 1993 and 2007 following the state's reforms.
Even in Massachusetts, there is evidence that individuals are selectively jumping in and out of the market when they need healthcare. Data from health insurers in Massachusetts indicate that the number of peopl ein the individual market with coverage of less than 12 months has doubled post reform. These individuals have a significantly higher claims to premium ration when compared to those who had coverage for more than 12 months but let it lapse or those that are active.
Without strong penalties, similar types of behavior are likely to emerge in the reformed individual market--resulting in significantly higher premiums for the insured.
This is one of the reasons why I believe that the "reform" bills will just make American healthcare worse than it already is.