PPACA costs fall as premiums beat forecast

April 14, 2014 at 12:58 PM
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April 14 (Bloomberg) — The health law will cost $104 billion less over the next decade, the Congressional Budget Office said after premiums for private Patient Protection and Affordable Care Act (PPACA) plans came in lower than the agency expected.

The premium for a benchmark "silver" level plan, the second-most generous available, will average $4,400 in 2016, the CBO said today in a report – 15 percent less than it forecast in 2009. The budget office reports regularly on the economic effects of the law.

About 6 million people on average are expected to be enrolled in 2014 in private health plans through insurance exchanges created by the Patient Protection and Affordable Care Act, the budget agency said. The U.S. health secretary, Kathleen Sebelius, said last week that 7.5 million people signed up for private plans with enrollment set to end tomorrow.

White House press secretary Jay Carney called the CBO report "welcome news."

"It shows that marketplace health-care costs have gone down, because premium estimates have gone down," he told reporters in a briefing.

Sebelius's enrollment figure exceeded an initial CBO estimate of 7 million made before the exchanges opened Oct. 1 and technology failures prevented millions from immediately signing up. In February, the agency revised its estimate to 6 million.

Imprecise statistics

The estimate "cannot be compared directly with the number of people who have enrolled through the exchanges as of any given date," according to the CBO report. "The number of people who will have coverage through the exchanges in 2014 will not be known precisely until after the year has ended."

President Barack Obama on April 11 credited Sebelius with the turn-around when he announced his nominee to replace her, White House budget director Sylvia Mathews Burwell.

The CBO's latest estimate is for all of 2014 and includes people who are able to sign up or leave coverage after April 15 because of life-changing events such as marriage or losing a job. The agency said that 7 million would also join Medicaid, the government program for low-income people that is being expanded in 26 states, a decrease of 1 million since February.

The total number of people enrolled in exchange plans at any point during the year may be higher than the CBO's estimate of 6 million on average "because some people will be covered for only part of the year," the budget agency said in a report.

Declining subsidies

The agency said it reduced its estimate of the cost of the program because it anticipates the government will provide less in subsidies that help people pay premiums for the Affordable Care Act plans. The government will pay $17 billion this year, a $3 billion decrease from its February estimate, the agency said. The aid, available to people earning less than four times the poverty level, or about $95,000 for a family of four, will cost about $1 trillion through 2024, the CBO said in its report, a reduction of about $200 billion since February.

The budget office said premiums are expected to rise more rapidly after 2016, at about a 6 percent annual rate, to $6,900 on average for the benchmark silver-level plan in 2024.

While the Medicaid expansion is expected to cost $20 billion in the first year, an increase of $1 billion from the February estimate, the projected cost of $792 billion through 2024 is unchanged.

The CBO said it expects fewer Americans and employers to pay fines to the government for not carrying insurance or offering it to their workers, a loss of revenue that somewhat offsets the reduction in the cost of subsidies.

Penalty revenue

Penalty payments for violating the law's requirement that people carry insurance, known as the individual mandate, will total $46 billion in the next decade from an estimate of $52 billion in February. Revenue expected to be collected from employers that refuse to offer insurance totals $139 billion over a decade compared with $151 billion forecast in February.

Many people who refuse to buy insurance this year will be able to avoid paying fines because of a series of exceptions the Obama administration has created. The same is true for businesses, which aren't required to cover any of their workers next year unless they employ 100 people or more.

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