To repeat, the CBO found that premiums go down under health-care reform

Commentary on the Congressional Budget Office report showing that a given health-care insurance policy will become cheaper under reform has gotten a bit confused. Fox News, for instance, summarized the report as saying, ‘CBO: HC Overhaul Likely Won’t Bring Private Premiums Down.’ Let's assume good faith here, as this stuff is confusing.

First, the bottom line of the report is simple: The CBO says premiums will go down for the vast majority of Americans, and that the same insurance policy will cost less under reform.

The confusion comes in the CBO's analysis of the individual market, which serves about a tenth of the population. CBO expects prices in the individual market to rise by 10 or 12 percent, an expectation driven entirely by predictions that individuals will purchase policies that are much more comprehensive, and thus somewhat more expensive, then the insurance they can afford now. Then the CBO turns to look at the impact of the subsidies, which will cut premium costs by a bit over 50 percent for a bit over 50 percent of the market.

But as the CBO explains on page five, part of the increase in the type of insurance being purchased is the result of "people’s decisions to purchase more extensive coverage in response to the structure of subsidies." In other words, the change is driven by the subsidies, not offset by them.

To see this more clearly, imagine that the University of Florida decided to give incoming students who receive financial aid an $800 credit to purchase a laptop computer. You'd expect that the average computer purchased by students on financial aid would become a bit more expensive. But that wouldn't be because computers had become more expensive. It would be because people now had money to buy better computers.

So too for health-care reform. Premiums for the same policy in the individual market fall by 14 to 20 percent. But people in the individual market, who are largely low-income, will now have the opportunity to purchase better policies that cover more expenses and provide more security. That's a good thing. It's one of the reasons for health-care reform, in fact. And it is not analogous to health-care insurance becoming more expensive, any more than the fact that I could buy a nicer car after getting a better job suggests that cars are becoming more expensive.

Beyond that, it's important to remember that everyone has begun talking about the individual market results as if they are results for the whole of the health-care system. Sen. Mike Crapo, for instance, said that the CBO showed that Americans would see their premiums increase under reform. That's not even true in a misleadingly technical sense. It's simply false.

The individual market sees costs go up, as people can purchase better insurance at a lower cost. And after subsidies, most people are paying less and getting more than they would absent reform. Meanwhile, the small group and employer markets sees costs go down, and those markets serve more than 150 million Americans, as opposed to the individual market's 32 million customers. So it's not only true that most Americans will see their premiums go down, but it's also true that most Americans will see their premiums go down even if you account for the better insurance plans they'll be purchasing.