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New CBO Estimate Projects Cost of Complying with Individual Coverage Mandate

By John Reichard, CQ HealthBeat Editor

January 12, 2010 -- Every lawmaker on Capitol Hill knows that pending health care overhaul legislation would require individuals to buy health insurance—but what they haven't known throughout the debate is how much people would actually have to pay in premiums to comply with the mandate.

That missing piece of information has frustrated Sen. Olympia J. Snowe, R-Maine, as she has wrestled in recent weeks with how to make premiums affordable in a system of mandated coverage. Now, however, Snowe has a figure to work with: the Congressional Budget Office said in a new letter to the senator that the cost of a "bronze plan," the tier of benefits that people 30 or older would have to purchase, would average between $4,500 and $5,000 for individuals and between $12,000 and $12,500 for family coverage.

People below the age of 30 would be permitted to fulfill the mandate by purchasing coverage that paid benefits for catastrophic medical expenses, which is expected to cost considerably less than the bronze plan.

The estimate for the bronze plan does not factor in subsidies that Americans with incomes under 400 percent of the federal poverty level would be eligible to receive. For those receiving subsidies, the premium costs could be significantly lower.

In a letter in November to Sen. Evan Bayh, D-Ind., CBO had previously estimated that under the Senate health care overhaul bill, under current law, with no health overhaul in place, individual coverage in the non-group market in 2016 would cost $5,500 and family coverage $13,100. The letter to Bayh estimated that under the Senate bill, the cost would be $15,200 for family policies and $5,800 for single policies.

The earlier CBO figure was not based on the cost of a bronze plan, but rather assumed generous benefits—an actuarial value of 72 percent.

So the cost of a bronze plan would be considerably less than both the estimates of premium costs under current law and under the Senate proposal based on the higher actuarial value assumed by CBO in its estimate forwarded to Bayh.

To the extent lawmakers have been gauging affordability based on the estimates given Bayh, the new estimates may make them somewhat more comfortable about the cost of complying with the individual mandate.

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