The latest analysis from the nonpartisan Congressional Budget Office on the likely economic impact of health care reform offers a measure of validation to supporters and opponents both as the landmark 2010 law nears its day of reckoning in the U.S. Supreme Court.
The CBO estimates that the Affordable Care Act will cost the government $48 billion less through 2021 than previously projected. The revised estimated net cost – $1.08 trillion, down from $1.13 trillion, over the coming decade – mostly reflects lower estimates for subsidies and tax credits necessary to roll out the planned state health insurance exchanges in 2014.
But the CBO also slightly increased its projection for the number of workers who will either not be offered or will opt out of employer-sponsored health insurance. The CBO previously estimated that number at about 3 million by 2019. The revised estimate is that a reduction of 3 to 5 million workers is more likely from 2019 through 2022.
Reform opponents have long predicted a mass migration from employer-based health insurance programs under health care reform due to the expanded availability of Medicaid and subsidies through state health insurance exchanges. They claim that those who land on Medicaid and subsidized plans will erode the savings promised by the Affordable Care Act.
The CBO says that their revised projection actually represents "several shifts in coverage," all of them intentional. Here's how they did the math:
- From the CBO: "About 11 million people who would have had an offer of employment-based coverage under prior law will not have an offer under the ACA. That estimate represents about 7 percent of the roughly 161 million people projected to have employment-based coverage under prior law. The businesses that choose not to offer coverage as a result of the ACA will tend to be smaller employers and employers with predominantly lower-wage workers."
- Another 3 million workers will qualify for subsidized insurance because their employer plan will be deemed unaffordable.
- About 9 million people who would not have been covered by an employer-sponsored plan prior to health care reform will be covered under the ACA, "which will lead some employers who would not have offered coverage in the absence of the ACA to offer it and will lead some people who would not have taken up their employer’s offer of insurance to do so" under the individual mandate, according to the CDO.
In sum: 11 million + 3 million depart employer plans + 9 million join employer plans = 5 million fewer on employer-based plans.
Is that a bad thing? Jessica Banthin and Paul Jacobs of the CBO’s Health and Human Resources Division don't think so. They wrote the following.
The scenario with the largest reduction in employment-based coverage actually lowers the cost of the ACA to the federal government relative to the baseline projections because the extra costs for Medicaid and exchange subsidies are more than offset by the increased revenues resulting from higher taxable compensation among workers who receive higher wages in lieu of health benefits.
Interesting proposition. Would you rather have your wages docked to pay for your employer-based health insurance or take that money in cash and shop for your own coverage in the upcoming state exchanges?
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