UPDATE: CBO At Odds With Private Estimates On Health Bill
(Updates with new Lewin Group estimates starting in the third paragraph.)
By Martin Vaughan
Of DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- The Congressional Budget Office said that 3 million
people would lose employer-sponsored health coverage if a House health-overhaul
bill went into effect - an estimate that is only a fraction of the one in a
widely cited private-sector study.
Another 3 million would decide that government subsidies for purchasing
coverage through a new "health insurance exchange" are a better deal than what
their employer is offering, the CBO said in a Sunday letter to House lawmakers.
Including part-time employees, 9 million people who would be expected to have
health insurance through an employer wouldn't be enrolled in employer-sponsored
plans by 2016 if the House bill were made law, the CBO said.
That figure is at odds with an analysis by the Lewin Group, a private health-
care consulting firm. In an updated estimate released Monday, the group
predicted that employers covering about 88.1 million people would drop coverage
and enroll their employees in the public health-insurance plan if the House bill
is enacted.
In addition, the CBO said the number of people losing employer-based coverage
under the House bill would be more than offset by 12 million new enrollees in
employer health plans. That is because a new requirement in the House bill for
individuals to purchase insurance would put pressure on firms that don't offer
coverage now to do so in the future.
Democrats rushed out a press release trumpeting the finding, claiming the CBO
analysis confirms that the bill would accomplish President Barack Obama's desire
to keep employer-sponsored health plans intact.
But some health-care analysts are casting doubt on the CBO's prediction. "CBO
is using very over-simplified assumptions," said Paul Fronstin of the Employee
Benefit Research Institute. He said the Lewin Group analysis is "more realistic"
in its assumption that a much larger number of employers will drop coverage once
government-subsidized health benefits through an exchange become available.
EBRI is a nonpartisan, nonprofit research group funded by private companies.
The main reason for the glaring disparity between the CBO and Lewin Group
estimates is that the CBO assumes workers at firms with more than 50 employees
won't have access to the health-insurance exchange. The Lewin Group assumes that
all firms, regardless of size, will be allowed to drop coverage and send their
workers to find health care through the exchange.
The House bill leaves it ultimately up to the commissioner of the new exchange
to decide which employers would have access.
But even if participation in the exchange is limited to firms with 20 or fewer
employees, the Lewin Group said 21.9 million will shift from employer-based
health coverage to the exchange - still more than twice what the CBO predicted
at a 50-employee cap.
John Sheils, who coauthored the Lewin Group study, said that if the goal of
the House legislation is to restrain health-care costs as much as possible,
eligibility for the exchange must be extended to large firms as well.
Outside the public plan, "there's nothing in this bill that saves money for
anyone. If [large firms] don't get access to the public plan, they get zero cost
containment," he said.
Firms that currently offer health insurance would save on average $437 per
worker a year under the House bill, according to the Lewin Group analysis. That
assumes that the exchange and public option would be available to all workers,
regardless of firm size.
Firms that don't now offer coverage would see costs increase by $862 a worker
a year under the House bill, the Lewin Group said.
The House health-care legislation creates a new public health-care plan that
would be offered to eligible Americans through an exchange that would also
include offerings from private insurance companies. The bill would mandate that
all but the smallest employers offer affordable health coverage to their
workers, or face a penalty of up to 8% of payroll.
It would also mandate that individuals purchase health insurance, or face a
2.5% income-tax penalty.
The CBO may also be understating the migration from employer coverage to the
exchange, said EBRI's Fronstin, because its estimates are for 2016 - just one
year after the House bill is fully implemented.
"Employers don't all move on a dime," he said. "This is not going to play out
overnight; it's going to play out over 5 or ten years."
The CBO reasoned that the 8% payroll tax penalty on firms that drop coverage,
combined with the employees' loss of a tax subsidy for employer-based coverage,
would "provide a strong financial inducement for employers to continue offering
coverage to their workers."
For instance, an employee with single coverage whose annual premiums are $5,
000 reaps a $1,500 tax benefit as a result of being able to exclude the benefit
from income. Employers would be expected to compensate employees for at least
part of the loss of that benefit. In addition, if a firm pays average wages of $
40,000, the penalty under the House bill for not offering qualified coverage
would be $3,200. The sum of the penalty and the tax subsidy is almost equal to
the $5,000 cost of the premium - leaving little financial incentive for the
employer to drop coverage.
Sage Eastman, a spokesman for House Ways and Means Committee Republicans, said
that even if the CBO's estimate is correct, it contradicts Obama's oft-repeated
assertion that "if you like the health coverage you have, you can keep it."
"Millions of people are going to lose the coverage they have and like. The
only question is, is it 9 million, or is it 100 million?" said Eastman.
-By Martin Vaughan, Dow Jones Newswires; 202-862-9244; martin.vaughan@
dowjones.com
(END) Dow Jones Newswires
07-27-091656ET
Copyright (c) 2009 Dow Jones & Company, Inc.
|