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Letter to the Honorable Harry Reid 1 (November 2009)

handle is hein.congrec/cbo9356 and id is 1 raw text is: CONGRESSIONAL BUDGET OFFICE Douglas W. Elmendorf, Director U.S. Congress Washington, DC 20515 November 20, 2009 Honorable Harry Reid Majority Leader United States Senate Washington, DC 20510 Dear Mr. Leader: 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 the Patient Protection and Affordable Care Act, as proposed on November 18, 2009. The analysis reflects the estimate of that bill that the Congressional Budget Office (CBO), in conjunction with the staff of the Joint Committee on Taxation (JCT), released on that date. Subsidies and Payments at Different Income Levels Under the Patient Protection and Affordable Care Act The enclosed table focuses on enrollees who purchase a reference plan-the second lowest cost silver plan, as defined in the bill-because federal subsidies would be tied to the premium for it. 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 the bill 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 $5,200 for single policies and about $14,100 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 bill, the maximum share of income that enrollees would have to pay for the reference plan would vary depending on their income relative to the federal poverty level (FPL). For enrollees with income below 133 percent of the FPL, the maximum share of income paid for that 1 The bill includes a reinsurance program that would operate from 2014 through 2016, financed by a fee on insurers. Because that program is temporary, its effects on premiums in 2016 have not been reflected in the attached table in order to provide a more accurate assessment of the bill's impact once it is fully implemented.

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