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Subsidies and Payments at Different Income Levels under H.R. 3962 1 (November 2, 2009)

handle is hein.congrec/cbo1094 and id is 1 raw text is: CONGRESSIONAL BUDGET OFFICE Douglas W. Elmendorf, Director U.S. Congress Washington, DC 20515 November 2, 2009 Honorable Charles B. Rangel Chairman Committee on Ways and Means U.S. House of Representatives Washington, DC 20515 Dear Mr. Chairman: This letter responds to questions about the subsidies that enrollees would receive for premiums and cost sharing and the amounts that they would have to pay, on average, if they purchased a relatively low cost plan in the new insurance exchanges to be established under H.R. 3962, the Affordable Health Care for America Act, as introduced in the House of Representatives on October 29, 2009. The analysis reflects the preliminary analysis of that bill that the Congressional Budget Office (CBO), in conjunction with the staff of the Joint Committee on Taxation (JCT), released last week. Subsidies and Payments at Different Income Levels Under H.R. 3962 The enclosed table focuses on enrollees who purchase a reference plan (the premiums for which equal the average of the three lowest-cost basic plans, as defined in the bill), because federal subsidies would be tied to that average. Such a plan would have an actuarial value of 70 percent, which represents the average share of costs for covered benefits that would be paid by the plan. Although premiums under H.R. 3962 would vary by geographic area to reflect differences in average spending for health care and would also vary by age, the table shows the approximate national average for that lower-cost reference plan-about $5,300 for single policies and about $15,000 for family policies in 2016. Enrollees could purchase a more expensive plan or more extensive coverage for an additional, unsubsidized premium-and CBO anticipates that many enrollees would do that, so the average premiums actually paid in the exchanges would be higher (although average cost-sharing amounts could be lower than those shown in the table). The figures are presented for 2016 in order to illustrate the likely situation after the proposed changes in insurance markets were fully implemented. (A downside of that approach is that the figures are harder to compare with those observed in 2009.) Under the House bill, the maximum share of income that enrollees would have to pay for the reference plan in 2013 would range from 1.5 percent for those with income less than or equal to 133 percent of the federal poverty level (FPL) to 12 percent for those with income equal to 400 percent of the FPL. (People with income below 150 percent of the FPL, however, would generally be eligible for Medicaid and thus ineligible for subsidies within the exchanges.) After 2013, those income-based caps would all be indexed so that the share of the premiums that enrollees (in each income band) paid would be maintained over time. As a result, the income- based caps would gradually become higher over time; for example, they are estimated to range from about 1.6 percent to about 12.8 percent in 2016. Enrollees with income below 350 percent

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