Concurrently with its April 2014 update of February 2014 projections of federal revenues and spending through 2024, the Congressional Budget Office revised its projection of how the Affordable Care Act will change insurance coverage, federal spending and revenues. The numbers should not shock anyone who has been keeping up, but we found them noteworthy.
ACA Spending and Revenues
Excluding ACA administration and enforcement costs, here are highlights (numbers in billions of dollars, by fiscal year, relative to the baseline annual deficit).
Total Exchange spending (mostly www.healthcare.gov) will rise about 776% – from $17B to $132B – between 2014 and 2024. This includes premium subsidies, cost-sharing subsidies, and payments to insurers through the reinsurance and risk corridor programs. The total number jumps from $17B to $77B in just the first three years. The CBO projects that premium subsidies will far exceed cost-sharing subsidies in every year, starting with $12B of $21B 2014 and rising to $110 of $133B in 2024. Risk adjustment, reinsurance and risk corridor payments to insurers are expected to run $18B to $19B annually from 2015 through 2024.
As we guessed, the ACA’s small employer premium tax credit program is not much ado about even less. Its $1B cost in 2014 is expected only to double by 2024.
Individual mandate penalties are estimated to raise less than half a billion dollars in 2014, but $4B by 2016 and $6B by 2024. (Apparently, the CBO concedes that some self-employed people who pay quarterly estimates are paying individual mandate taxes during 2014). Employer penalties are expected to raise $8B starting in 2016, $15B by 2019 (not including the Cadillac tax) and $21B by 2024. The Cadillac tax alone is expected to yield revenues of $5B in 2018, $10B in 2019 and $30B by 2024.
Health Insurance Coverage
These are projected changes for U.S. residents younger than 65, expressed in millions of people per calendar year. Numbers may not match due to rounding.
Without the ACA, the CBO guesses that employers would cover 156M people in 2014 and 166M by 2024 – about 10M more people, an increase of about 6.4%. The ACA reduces employer coverage by a half million or less in 2014, 2M in 2015, and 7M in 2016 and beyond. It reduces individual coverage by 1M in 2014, rising to 5M in 2024. Insurance Exchanges (chiefly www.healthcare.gov) are projected to cover 6M in 2014, 13M in 2015, and 24M to 25M in 2016 and beyond. SHOP purchases by employers are expected to cover about 2M in 2014, 3M in 2015, and 3M to 4M in 2016 and beyond. Expanded Medicaid is expected to add 7M in 2014, 11M in 2015, and 12M to 13M in 2016 and beyond. Including illegal immigrants, who are ineligible for affordability programs, the uninsured population is projected to fall by about 11M people, from 42M in 2014 to 31M in 2024.
In every year, the CBO thinks that less than a half million people will receive Exchange subsidies due to unaffordable employer coverage offers. The average subsidy per enrollee is expected to be $4,140.00 in 2014, rising to $7,170 in 2024. Just 1M of the estimated 6M enrollees are expected to buy an Exchange QHP without subsidy in 2014, rising to 3M of 13M in 2015, and 5M to 6M of 24M to 25M thereafter.
Measuring the accuracy of these estimates may be difficult. For example, the U.S. Census Bureau is changing the questions it asks about insurance coverage in ways that, according to 2013 tests, tends to lower the number of uninsured, making before-and-after comparisons unreliable. Also, keep in mind that CBO estimates assume the continuance and enforcement of current laws and regulations for the entire ten-year period. That may be the wildest guess of all.