ACA provisions will cost $142 billion less than predicted

March 12, 2015

Provisions of the Affordable Care Act will cost $142 billion less over the 2016–2025 period than originally estimated by government agencies, due to slower premium growth and changes in enrollment sources.

Provisions of the Affordable Care Act (ACA) will cost $142 billion less-or 11%-over the 2016–2025 period than originally estimated by the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT).

According to revisions released in March from the CBO, the reduction is based on two primary factors: a slower growth of private health insurance premiums; and differing sources and numbers of people gaining insurance through the ACA.

RELATED: Health expenditures slow to lowest growth rate in 53 years

In January, the original estimated cost of the ACA was expected to be more than $7.6 trillion from 2016 to 2025. New estimates place that number at $7.2 trillion.

Factors that led to lower overall budget projections stemming from the number and type of health insurance gained under the ACA include:

  • A lower estimate of the total number of people with employment-based coverage;

  • An increase in the estimate of workers employed by businesses with 1,000 or more employees;

  • A decrease in the estimate of the number of people who had no health insurance at all; and

  • Higher Medicaid enrollment before 2014 than previously estimated.


NEXT:  Other factors that led to lower estimates

 

The CBO and the Joint Committee on Taxation (JCT) lowered their estimates of private health insurance premiums for the 2016 – 2025 period based on new information on national health expenditures. “Spending by private health insurers on health care and administration rose less in 2013 (the most recent year for which data was available) than in preceding years and by much less than the agencies had expected for 2013” concluded the CBO and JCT, the result of the continuing trend of “relatively” slow growth in healthcare spending.

After removing the effects of overall inflation and adjusting for population changes, the CBO and JCT estimated that private health insurance spending per enrollee only grew an average of 1.8% per year between 2006 - 2013, compared to the rate of 5% per year between 1998 - 2005. Estimates of spending-per-enrollee are expected to grow 2.2% between 2014 - 2018 and 3.1% between 2019 - 2025.

The slower rate of growth in premiums is also expected to impact the excise tax on “Cadillac plans.” Fewer plans will have to pay the “Cadillac tax,” which will decrease the projected revenues by more than 40%.

The lower rate of private health insurance cost affects the amount of money the government needs for healthcare exchange subsidies. In 2010, the CBO predicted that health insurance subsidies would average $5,200 per person in 2015. The new estimate puts hat total at $3,960, a 20% reduction.

Medicaid costs are expected to be $847 billion in the next decade, down 8% from the January estimate.