For many people, the health care issue boils down to this: Are my insurance rates going to go up or down?
Not surprisingly then, one of the testiest exchanges at the health care summit Thursday came between President Barack Obama and Sen. Lamar Alexander, R-Tenn., over how the Democrats' health care plan would affect premiums.
Both cited an analysis of the Senate health care bill by the nonpartisan Congressional Budget Office to make their case.
"The Congressional Budget Office report says that premiums will rise in the individual market as a result of the Senate bill," Alexander said.
"No, no, no, no," Obama retorted. "This is an example of where we've got to get our facts straight. ...
"Here's what the Congressional Budget Office says. The costs for families for the same type of coverage that they're currently receiving would go down 14 percent to 20 percent. What the Congressional Budget Office says is that because now they've got a better deal, because policies are cheaper, they may choose to buy better coverage than they have right now, and that might be 10 percent to 13 percent more expensive than the bad insurance that they had previously. But they didn't say that the actual premiums would be going up."
Alexander later stood his ground, saying, "With respect, you're wrong about — your bill would increase premiums, I believe. You say it wouldn't."
This seemed like a good place for us to step in and referee.
First, one of the key qualifiers that many people may have lost in this exchange is that they were debating the effects on premiums for people in the individual market. These are the people who do not get their insurance through an employer; it's only a fraction of the overall market. The Congressional Budget Office estimates that if the Democrats' plan were adopted, the individual market would grow to about 17 percent of the population by 2016.
The Democrats' plan calls for the creation of a health insurance exchange in which individuals could shop for insurance with private companies competing for their business. The idea is that it would allow individuals to purchase insurance at lower, group rates. Plans offered by companies participating in the exchange would have to meet government-mandated minimum coverages.
The CBO estimated that the average premium for people in the individual market would be about 10 percent to 13 percent higher in 2016 than under current law. Specifically, the CBO estimates the average cost of family policies purchased by individuals would be $15,200 in 2016, as opposed to $13,100 under current law.
That supports Alexander's comment. But Obama correctly notes that much of the added cost is tied to people getting better insurance.
The CBO said there are three things that would drive premiums to rise or fall:
• Average premiums would be 27 percent to 30 percent higher because more coverage would be obtained. In particular, the average insurance policy would cover a substantially larger share of enrollees' costs for health care and a slightly wider range of benefits.
• Average premiums would be 7 percent to 10 percent lower because of a net reduction in costs to insurers, mostly from the changes in the rules.
• Average premiums would be 7 percent to 10 percent lower because of a shift in the types of people obtaining coverage. Most of that change is tied to an influx of healthier people, who would purchase coverage because of subsidies and a new tax penalty for failing to purchase insurance.
Obama gets to his figure by combining those last two cost reductions, but not including the cost increase tied to people essentially getting better insurance.
Both Obama and Alexander cited figures independent of the effect of subsidies. But under the Senate health plan, about 57 percent of people in the individual market would receive federal subsidies, and those subsidies would cover nearly two-thirds of the total premium.
One last point: the Democrats' plan would allow people who currently have individual policies to grandfather in their existing policy. According to the CBO, "the premiums for those policies would probably not differ substantially from current-law levels."
In other words, if you were to opt to keep the exact same individual plan (an option the CBO doesn't believe many will take because, with subsidies, most could get a better plan cheaper), the CBO doesn't see the cost rising or falling substantially.
And again, we are talking here only about premiums for people in the individual market. For most people, who get their insurance through their company, the CBO projects premiums to decline slightly — in the 0 to 3 percent range — from where they would go if no health plan is passed.
We think both Obama and Alexander have selectively chosen from the CBO report to suit their needs.
Alexander insists premiums in the individual market will go up, without acknowledging that that's because most people will be getting better insurance coverage. Bottom line, people won't be paying more for the same thing. They'll be paying more for better plans. On top of that, many will get federal subsidies.
But we also think Obama has blinders on when citing the CBO report. Yes, the CBO estimated 14 to 20 percent savings due to changes in the individual market. But he ignores the estimated cost increases tied to more people getting better insurance. He tries to gloss over this by comparing costs "for the same type of coverage that they're currently receiving." But most would not be getting the same kind of coverage. Some of the shift to better coverage would be due to personal choice — with subsidies, many people would be able to get better coverage at the same cost or cheaper — but some would be tied to new government-mandated minimum coverage and the threat of tax penalties. And for those who opt to grandfather in their individual policies, the CBO doesn't see much of a change in premiums. So we rule Obama's statement Half True.
The ruling has been edited for print. For the full ruling — and others — see PolitiFact.com.