Democrats are crowing that the latest CBO report on the cost of Obamacare proves the Law is working. The latest estimates lower the cost over the next ten years based on current law, the assumption that all components are implemented and work as planned and health care cost trends remain subdued (they are already starting to rise).
But with all that comes a direct impact on consumers that politicians don’t talk about.
What the CBO says:
A crucial factor in the current revision was an analysis of the characteristics of plans offered through the exchanges in 2014. Previously, CBO and JCT had expected that those plans’ characteristics would closely resemble the characteristics of employment-based plans throughout the projection period. However, the plans being offered through the exchanges this year appear to have, in general, lower payment rates for providers, narrower networks of providers, and tighter management of their subscribers’ use of health care than employment-based plans do.
CBO and JCT anticipate that, as enrollment in the exchanges rises, the differences between employment-based plans and exchange plans will narrow. Therefore, projected premiums during the next few years were revised downward more than were premiums for the later years of the coming decade.
The lower exchange premiums and revisions to the other characteristics of insurance plans that are incorporated into CBO and JCT’s current estimates have small effects on the agencies’ projections of exchange enrollment. Although lower premiums will tend to increase enrollment, narrower networks and more tightly managed benefits will tend to reduce the attractiveness of plans and thereby decrease enrollment. The net effect on projected enrollment in the exchanges is small.
Then we have a look at some of the assumptions in the CBO calculations; again not good news for workers. This includes lower health benefits, higher out-of-pocket costs and higher taxes. Also note that the CBO assumes that reduced health benefits will result in higher taxable wages. I wouldn’t hold your breath on that one. Note also the assumption that 13 million Americans will lose their employer-based coverage.
Obamacare is in effect massive cost shifting. Every penny of claimed savings is coming from the pocket of Americans in the form of higher taxes or higher health care spending out-of-pocket.
Excise Tax on High-Premium Insurance Plans
According to CBO and JCT’s estimates, federal revenues will increase by $120 billion over the 2015–2024 period because of the excise tax on high-premium insurance plans. Roughly one-quarter of that increase stems from excise tax receipts, and roughly three-quarters is from the effects on revenues of changes in employees’ taxable compensation and, to a lesser extent, in employers’ deductible expenses. In particular, CBO and JCT anticipate that many employers and workers will shift to health plans with premiums that are below the specified thresholds to avoid paying the tax, resulting generally in higher taxable wages for affected workers. [The CBO forgot to mention that workers will have higher out-of-pocket medical costs as a result of lower value benefit plans to avoid the excise tax.]
Other Effects on Revenues and Outlays
The ACA also will affect federal tax revenues because fewer people will have employment-based health insurance and thus more of their income will take the form of taxable wages. CBO and JCT project that, as a result of the ACA, between 7 million and 8 million fewer people will have employment-based insurance each year from 2016 through 2024 than would have been the case in the absence of the ACA. That difference is the net result of projected increases and decreases in offers of health insurance from employers and of choices about enrollment by active workers, early retirees (people under the age of 65 at retirement), and their families.
In 2019, for example, an estimated 13 million people who would have enrolled in employment-based coverage in the absence of the ACA will not have an offer of such coverage under the ACA; an estimated 3 million people who would have enrolled in employment-based coverage will have such an offer but will choose not to enroll.
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