CBO Updates Estimates of the ACA's Budgetary Effects

The Congressional Budget Office (CBO) reports that implementation of the Affordable Care Act (ACA) will cost $5 billion less in 2014 than the agency previously estimated. The report further details that an additional 12 million non-elderly Americans will receive coverage this year due to the health law’s implementation.

“Relative to their previous projections made in February 2014, CBO and JCT (Joint Committee on Taxation) now estimate that the ACA’s coverage provisions will result in lower net costs to the federal government: The agencies currently project a net cost of $36 billion for 2014, $5 billion less than the previous projection for the year; and $1.383 trillion for the 2015-2024 period—$104 billion less than the previous projections,” the CBO report read.

The CBO, which is a nonpartisan group that provides research and cost estimates for policy makers, says that the adjusted cost projections of ACA implementation are a result of insurance companies tightening the costs of plans they offer through the healthcare insurance exchanges. Nevertheless, while current exchange plan offerings remain affordable due to narrow provider networks, the CBO and JCT expect that this trend will shift in coming years.

“As projected enrollment in exchange plans grows from an average of 6 million in 2014 to 24 million in 2016, the CBO and JCT anticipate that 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,” the report says. “CBO and JCT expect that exchange plans will still have lower provider payment rates, more limited provider networks, and stricter management of care, on average, than employment-based plans, but that the differences between employment-based plans and exchange plans will narrow as exchange enrollment increases. That pattern will put upward pressure on exchange premiums over the next couple of years, although CBO and JCT anticipate that the plans’ characteristics will stabilize after 2016.”

Around the Web

Report Projects Healthcare Costs to Dip Slightly [ABC News]

Updated Estimates of the Effects of the Insurance Coverage Provisions of the Affordable Care Act, April 2014

[CBO]