Model: Federal Health Law Benefits State’s Average Residents

September 20, 2011

Five years from now, the average Colorado household will have an extra $840 a year in buying power thanks to the federal health care law. So says the MIT economist hired to model what's expected to happen when the law is fully in effect. Colorado Public Radio Health Reporter Eric Whitney has more.

CPR HEALTH REPORTER ERIC WHITNEY: If you want to know what the federal health care law President Obama signed last year is going to do to the price of health insurance in Colorado, there are dozens and dozens of variables to consider. How many people will qualify for tax credits? How many will keep the insurance their jobs offer? How many will buy individual policies? What kind of benefits will be offered?
Attempting to answer those questions, is this man.

MIT ECONOMICS PROFESSER JONATHAN GRUBER: My name's Jonathan Gruber, and I'm a professor of economics at MIT.

REPORTER: Gruber was hired by Governor John Hickenlooper's office to model the federal health law's impact on Colorado.
Gruber helped write the federal law. He's also helping Massachusetts implement a law very similar to the federal one in that state. Gruber designed a computer model to help predict the federal law's impact on a given population.

GRUBER: If you're the vast majority of Colorado people, getting health insurance from your employer, this law is not really going to affect you.

REPORTER: That's because the vast majority of Coloradans, 2.7 million of them, get coverage through their jobs. It's called “employer sponsored insurance,” and Gruber expects most people to stick with it.

GRUBER: Most people with employer sponsored insurance like it. They wish it was cheaper. This law doesn't do a whole lot about that in the short run. In the long run it hopes to.

REPORTER: The people who'll see a lot of change from the federal health law, Gruber says, are on either side of the big middle class bulge.

GRUBER: Basically what you see is large benefits to low income groups, essentially no effect on middle income groups, fairly large reduction in income for higher income families.

REPORTER: The large benefits Gruber says low income groups will get?

That means, for one, that more Coloradans will be eligible for Medicaid
Gruber says the federal health law will extend Medicaid benefits to 160,000 more Coloradans by 2016.

People who make a little more money, and don't qualify for Medicaid, will get tax subsidies to help them buy health insurance. Gruber says that's about half-a-million Coloradans.

The economist's best guess for the impact on families' bottom lines?

GRUBER: The affordable Care Act will result in the average Colorado household having an income increase of about $840 a year, by 2016.

REPORTER: That's the average – a lot of Colorado households won't see any extra money and, Gruber says, high income earners will take a financial hit.

GRUBER: Those individuals who are young, and healthy, and not poor, will see an increase in costs.

REPORTER: Those young, healthy people who don't buy health insurance now will see the biggest jump in insurance costs. That’s because, in 2014, the federal law requires almost every American buy a minimum level of health coverage.

That idea is being fought over in the courts, with the US Suprme Court expected to take it up next year.

But if the mandate to buy insurance holds, Gruber says anyone who buys a health policy on their own, in the individual market and not through their jobs, they'll pay about $4,000 a year for health insurance. He says that's significantly less than they'd pay if the federal health law hadn't passed.

So? How good are MIT Economist Jonathan Gruber's numbers?

COLORADO HEALTH BENEFITS EXCHANGE BOARD INTERIM CHAIR GRETCHEN HAMMER: The numbers give us a point of reference, I really hope we are really mindful that they are just a point of reference, and that we're going to have to treat them with some shades of grey around them.

REPORTER: That's Gretchen Hammer. She's on the appointed board that's setting up Colorado's new health insurance marketplace, or “exchange.” The federal health law requires all states to have exchanges where people getting health tax credits can shop.  
Hammer says the dollar figures aren’t rock solid, and even Gruber, who came up with them admits that.  But he and Hammer are more confident in the population numbers he forecast, like how many people are expected to use Colorado's exchange, versus sticking with coverage through their jobs,  and how many will be on Medicaid.

HAMMER: I think getting a clear picture of how many people will be in each one of those categories will enable us as a board to make good decisions.

REPORTER: Decisions like: How many people the exchange will have to hire to run the new marketplace, how much that will cost, and how to pay for it.
The new economic analysis says about 600,000 Coloradans will use the state health insurance exchange, but Hammer says it's too early to say how much it will cost to run, or how exactly to pay for it.