CBO sees lower costs for Affordable Care Act insurance provisions

McClatchy Washington BureauApril 14, 2014 


Keith Ward, from left, Deborah Owens, and Gwen Vinson help clients navigate the Affordable Care Act and choose the right plan at Urban Ministries in Raleigh, N.C., on Oct. 30, 2013.


— The Affordable Care Act’s insurance coverage provisions will be less costly to the federal budget than first projected and premiums for a key health plan are expected to rise by about 6 percent a year, the Congressional Budget Office said Monday.

Updating estimates issued in February, the non-partisan CBO said the cost to the federal government for the insurance provisions is $5 billion less than thought earlier this year. From 2015 through 2024, the provisions should prove $104 billion less costly. That’s 7 percent below earlier projections.

The falling cost projections from the CBO and the Joint Committee on Taxation of Congress are due in part to further analysis of retirement trends and of the health plans being offered on the public exchanges created to help individuals buy health insurance.

The new projections and other provisions of the ACA on net “are expected to reduce budget deficits,” the CBO said, repeating an earlier prediction that the act, shorthanded as Obamacare, will result in deficits being lower than they would be in the absence of the landmark legislation.

Deeper in the CBO’s report, however, are details that show why the ACA is such a hard sell to the public.

The CBO now thinks that the benchmark premium, derived from the second lowest-cost plan offered on health exchanges, will rise slightly next year and then by about 6 percent a year from 2016 to 2024. Opponents of the ACA are sure to call that a rising cost for consumers, and remind of President Barack Obama’s pledge that the ACA would result in lower premiums for most Americans.

Backers of the ACA are sure to respond that the CBO also said that the projected rise in the benchmark premium is actually 15 percent below a comparable estimate made by the agency in November 2009.

Therein rests much of the difficulty in assessing the ACA’s effectiveness. Many of its benefits involve tradeoff costs.

For example, the CBO expects that as more Americans purchase their own insurance instead of getting it through their employer, a good thing for the ACA, they’ll have more of their income treated as taxable wages. Workers with employer plans pay their portion in pre-tax dollars, so the shift to health plans purchased on exchanges will actually grow federal tax receipts and the higher wages will also mean more salary subject to Social Security contributions.

Similarly, the CBO’s latest economic projections envision slower growth in wages and salaries over much of the next decade. That is expected to change the projected distribution of income, making more people eligible for Medicare instead of subsidies from the government to buy insurance on the health exchanges.

The CBO also offered a sobering reminder about one of the main goals of the ACA, reducing the number of the uninsured in America.

Monday’s report said 31 million people, or one out of every nine non-elderly U.S. residents, would still be without health insurance in 2024.

About 45 percent of them, or 14 million, would chose not get insurance through an employer or an exchange. About 30 percent, or more than 9 million people, are undocumented immigrants who don’t qualify for subsidies or most state and federal health benefits. Roughly 20 percent of the 31 million will be eligible for Medicaid but choose not to enroll and another 5 percent live in states that chose not to expand Medicaid coverage.

Email: khall@mcclatchydc.com; Twitter: @KevinGHall.

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