The Congressional Budget Office estimates of how much health insurance premiums might cost if H.R. 3590, the Senate health reform bill, took effect, are too low, a think tank says.

The Council for Affordable Health Insurance, Alexandria, Va., a group that promotes a free-market approach to health finance issues, says the current structure of the Patient Protection and Affordable Care Act bill would promote adverse selection, especially in the early years.

CBO analysts have estimated that the bill, developed by Senate Majority Leader Harry Reid, D-Nev., would cut the cost of health coverage for small groups by about 10% compared with what the cost would be if current laws stayed in place; increase the unsubsidized cost of individual health coverage by more than 10%; and cut the cost of individual coverage by an average of more than 50% for individuals who would receive subsidies.

CAHI believes that individual health insurance premiums would come close to doubling, the group says.

The Reid health bill would require most people who could afford to buy health insurance to have health insurance, but the penalties for violating the requirement would be relatively low, and insurers would have to sell coverage on a guaranteed issue basis, Reid bill critics say.

“People who can buy health insurance when they need it (i.e., guaranteed issue) will have an incentive to wait until they need coverage, especially if the penalty for not buying coverage is low,” CAHI says.

“The CBO estimate seems to assume that the cost for the uninsured entering the market will be lower than the average already in the market,” CAHI says. “But that will only be true if the young, healthy uninsured actually buy coverage. Yet they tend to have lower incomes and have the least to gain by buying coverage now if they can’t be denied later. As a result, the lower-cost young may postpone joining.”

In addition, when uninsured people suddenly get coverage and people with insurance get better coverage, they may have a pent-up demand for care, and that pent-up demand could drive up costs, CAHI says.

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