CBO Says Obamacare Will Cost Less Than Projected
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The Fiscal Times
April 14, 2014

The White House is kicking off the week with some more good news for Obamacare. The Congressional Budget Office said on Monday that the federal government will spend significantly less than expected on health insurance benefits under the new law.

Related: Obamacare Could Drive Down Your Car Insurance Costs

The CBO and the Joint Committee on Taxation said the law’s insurance coverage provisions will now cost about $1.4 trillion over the next 10 years — about $104 billion less than previously estimated. This year alone the government will spend $5 billion less than projected.

The CBO said lower spending on the health care law is helping shrink deficits overall. The report projected that federal government will run a deficit of $492 billion in 2014—nearly 33 percent less than last year. Even so, budget deficits are projected to rise again starting in 2016 and to top $1 trillion annually by 2023.

The agency credits the expected decrease in Obamacare spending to lower-than-anticipated premiums for plans offered on the exchanges. The CBO projects the price of annual premiums to rise slightly from an average of $3,800 this year for the second-lowest silver plan to $3,900 in 2015 and $4,400 in 2016. The agency expects premiums to keep rising, reaching $6,900 in 2024, for an average annual increase of 6 percent from 2016 to 2024.

The new projection for 2016 is 15 percent lower than CBO’s November 2009 estimate, which forecast that premiums for those benchmark plans would average $5,200.

Still, there is a downside to the lower costs, according to the report: “The plans being offered through exchanges in 2014 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. Those features allow insurers that offer plans through the exchanges to charge lower premiums (although they also make plans somewhat less attractive to potential enrollees).”

CBO said it expects major provisions including the individual mandate —which requires people to have health insurance or pay a penalty — to offset total spending for Obamacare. Other major provisions like the employer mandate, which requires medium to large companies to cover their full-time workers, won’t take effect until next year, but will also play a large role in offsetting the costs of subsidies.

Related: How Obamacare Could Affect Your Taxes This Year

Aside from lower spending projections, the CBO said it expects more people to gain health coverage under the law. The report said in 2014 alone about 12 million people are expected to gain coverage through the federal and state exchanges as well as through the law’s Medicaid expansion.

It added that it projects 19 million people to have coverage under the law in 2015, and 25 million more by 2016. By 2024, the CBO says, about 89 percent of U.S. residents will have health coverage. That would leave some 31 million uninsured, which the CBO says is 26 million fewer than would lack coverage without Obamacare.

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Washington Correspondent Brianna Ehley, based in D.C., covers Congress, government agencies and spending issues, health care, and tax and economic policy for The Fiscal Times.