CBO: ObamaCare premiums and healthcare spending will rise by less than expected, because…
posted at 6:41 pm on April 15, 2014 by Erika Johnsen
The Congressional Budget Office released a report this morning that has received a lot of attention from ObamaCare’s many staunch media advocates because it essentially concludes that the cost of expanding coverage through the exchanges will be billions less than the CBO was predicting just a couple of months ago. That’s great news for the president’s crowning legislative achievement, right?
Health-insurance premiums for plans sold on the Affordable Care Act’s exchanges will be lower than previously expected, according to a report released Monday by the Congressional Budget Office.
The findings, by Congress’s nonpartisan spending analysts, result largely from the fact that insurance companies have redesigned plans on the government-run exchanges to shave costs. CBO found that individual policies on those marketplaces have narrower networks of doctors and lower reimbursement rates for health-care providers than is typical of employer-sponsored health plans.
As a result, CBO expects the federal government to spend about $165 billion less over the next decade on subsidizing health-insurance plans for lower earners than the office projected two months ago. Total spending on those subsidies is projected at $1.032 trillion between 2015 and 2024. The report was part of a broader federal spending update released Monday.
Did you catch that? Let’s go straight to the report for a closer look:
A crucial factor in the current revision was an analysis of the characteristics of plans offered through the exchanges in 2014. Previously, CBO and JTC 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. …
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.
In a nutshell, the CBO initially made its projections under the assumption that the plans offered through the exchange would be largely similar in terms of benefits to the sorts of plans being offered by employers — but that definitely isn’t going to be the case. The narrowed networks that insurers are using to keep costs down and the lower reimbursement rates for doctors and hospitals are things that neither consumers nor providers tend to like in the long run — which will likely mean more strain on the system and higher costs further down the road.