Obamacare Is Getting Cheaper

CBO says the law will cost taxpayers less than expected, and predicts only a slight increase in premiums next year.

This October 21, 2013 photo shows the US government internet health insurance exchange Healthcare.gov. US President Barack Obama on Monday defended his problem-plagued health reform plan, declaring at a White House event that, despite numerous glitches, the program is already helping many uninsured Americans. 'Let me remind everybody that the Affordable Care Act is not just a website,' Obama said, after the troubled online rollout of the plan. 'It's much more...You may not know it, but you're already benefiting from these provisions in the law.'AFP PHOTO / Karen BLEIER 
National Journal
Sam Baker
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Sam Baker
April 14, 2014, 7:43 a.m.

The most ex­pens­ive pro­vi­sions of Obama­care will cost tax­pay­ers about $100 bil­lion less than ex­pec­ted, the Con­gres­sion­al Budget Of­fice said Monday.

CBO also said it doesn’t ex­pect big premi­um in­creases next year for in­sur­ance plans sold through the health care law’s ex­changes.

In its latest ana­lys­is, CBO said the law’s cov­er­age pro­vi­sions — a nar­row part of the law that in­cludes only cer­tain policies — will cost the gov­ern­ment $36 bil­lion this year, which is $5 bil­lion less than CBO’s pre­vi­ous es­tim­ate. Over the next dec­ade, the pro­vi­sions will cost about $1.4 tril­lion — roughly $104 bil­lion less than CBO last es­tim­ated.

The ana­lys­is cov­ers only a part of the Af­ford­able Care Act. The costs out­lined in Monday’s re­port, in­clud­ing the Medi­caid ex­pan­sion and sub­sidies to private in­sur­ance, are off­set by oth­er pro­vi­sions that raise taxes or cut spend­ing. On bal­ance, CBO says, the law will re­duce the fed­er­al de­fi­cit.

Monday’s re­port also sheds some light on one of the big chal­lenges still to come for Obama­care: next year’s premi­ums. Some crit­ics have warned that premi­ums could skyrock­et next year, based in part on the demo­graph­ics of the people who signed up for cov­er­age this year.

But CBO isn’t ex­pect­ing a big hike. The budget of­fice says it ex­pects the av­er­age premi­um to rise “slightly” in 2015, by about $100 per year for the middle-of-the-road plans that have proven to be the most pop­u­lar op­tion in the ex­changes.

Premi­um in­creases from 2016 on will likely be high­er, av­er­aging about 6 per­cent per year, CBO said. That’s a na­tion­wide av­er­age; some areas of the coun­try will see big­ger jumps, oth­ers will see smal­ler in­creases. But if CBO’s pro­jec­tions pan out, the av­er­age in­crease would still fall short of the double-di­git hikes some in­surers have pre­dicted.

CBO said rising health care costs — not the risk pool of Obama­care en­rollees — is the biggest factor driv­ing its an­ti­cip­ated premi­um hikes. The people sign­ing up for cov­er­age in the ex­changes next year will prob­ably be health­i­er than those who signed up this year, CBO said, keep­ing premi­ums in check.

The budget of­fice also ex­pects in­surers to re­lax some of the tools they have used to keep premi­ums low — namely, lim­ited net­works of doc­tors and oth­er pro­viders, and par­tic­u­larly low pay­ments to those pro­viders. As en­roll­ment grows, CBO said, “many plans will not be able to sus­tain pro­vider pay­ment rates that are as low or net­works that are as nar­row as they ap­pear to be in 2014.”

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