Premiums for health care insurance in the Affordable Care Act are lower than the federal government had anticipated, the Congressional Budget Office reported on Monday when it revised its cost estimate for the health care law. The nonpartisan office now believes that the ACA will cost the government $5 billion less than projected in 2014 and $104 billion less for the 2015-2024 period. It also found “no clear evidence” that premiums will surge in 2015, noting that “enrollees in the future will be healthier, on average, than the smaller number of people who are obtaining such coverage in 2014.” The agency estimated that the national average premium for individual silver policy plans would increase by $100 that year.
The CBO attributes the additional savings to government, relative to the CBO’s last assessment from February 2014, to lower-than expected premiums, which in turn lowered the cost for exchange subsidies, and higher-than expected revenues from the excise tax on high-premium insurance plans.
“Despite projecting that slightly more people will receive insurance coverage through exchanges over the 2015–2024 period than they had anticipated previously,” the report says. “CBO and JCT project that costs for exchange subsidies and related spending will be $164 billion (or 14 percent) below the previous projection, mainly because of the downward revision to expected exchange premiums.” The office also predicted that plans offered in the exchanges will provide wider provider networks and higher reimbursement rates to providers as enrollment increases. “That pattern will put upward pressure on exchange premiums over the next couple of years, although CBO and JCT anticipate that the plans’ characteristics will stabilize after 2016,” it found.
The office also concluded that the law’s so-called shock absorbers — reinsurance payments that are distributed to insurers that attract high-cost enrollees — “reduced exchange premiums this year by approximately 10 percent” and will “reduce premiums by smaller amounts in 2015 and 2016.” CBO found additional savings in Medicaid, revising downward government spending per adult enrolled in the program.
Ultimately, 12 million more nonelderly people will have health insurance in 2014 as a result of the law. Twenty-six million more “will be insured each year from 2017 through 2024 than would have been the case without the ACA,” the CBO concluded.
This post initially suggested that Sen. Marco Rubio (R-FL) supports repealing the ACA’s reinsurance program. A spokesperson for the senator notes that the senator’s bill only targets the risk corridor provision of the law. Rubio has voted to repeal the ACA in its entirety, however, which would include the reinsurance provision. We regret the error.