Friday, March 16, 2012

Estimated Costs Of Health Reform Insurance Provisions, Number Covered, Lower For Ten-Year Period: CBO

The insurance coverage provisions of the Patient Protection and Affordable Care Act (ACA) over the 2012–2021 period are expected to cost just under a net $1.1 trillion and reduce the number of nonelderly people without health insurance coverage by 30 million to 33 million in 2016 and subsequent years. These are the main findings of the updated estimates the Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation (JCT) prepared for the March 2012 baseline budget projections.

The CBO and JCT projected net cost of just under $1.1 trillion for the ten-year period is about $50 billion less than the agencies’ March 2011 estimate for that ten-year period. The net costs reflect:

  • Gross additional costs of $1.5 trillion for Medicaid, the Children’s Health Insurance Program (CHIP), tax credits, and other subsidies for the purchase of health insurance through the newly established exchanges and related costs, and tax credits for small employers.

  • Offset in part by about $0.4 trillion in receipts from penalty payments, the new excise tax on high-premium insurance plans, and other budgetary effects (mostly increases in tax revenues).

“Those amounts do not encompass all of the budgetary impacts of the ACA because that legislation has many other provisions, including some that will cause significant reductions in Medicare spending and others that will generate added tax revenues, relative to what would have occurred under prior law,” the CBO and JCT explained. The two groups previously had estimated that the ACA will, on net, reduce budget deficits over the ten-year period, but they have not updated the overall budgetary impact.

The current estimate of the gross costs of the coverage provisions ($1.496 billion through 2021) is about $50 billion higher than last year’s projection. However, other budgetary effects of those provisions, which partially offset the gross costs, also have risen in CBO and JCT’s estimates (to $413 billion), leading to the small decrease in the net ten-year total. Over the ten-year period from 2012 through 2021, enactment of the coverage provisions of the ACA was projected in March 2011 to boost federal deficits by $1.131 billion, compared with the $1.083 billion estimate in March 2012.

Compared with prior law, the ACA is now estimated by CBO and JCT to reduce the number of nonelderly people without health insurance coverage by 30 million to 33 million in 2016 and subsequent years, leaving 26 million to 27 million nonelderly residents uninsured. The share of legal nonelderly residents with insurance is projected to rise from 82 percent in 2012 to 93 percent by 2022. According to the current estimates, from 2016 on, between 20 million and 23 million people will receive coverage through the new insurance exchanges, and 16 million to 17 million people will be enrolled in Medicaid and CHIP. At the same time, it is estimated that the number of people insured through an employer will be lower by 3 million to 5 million.

For more information on the report, Updated Estimates for the Insurance Coverage Provisions of the Affordable Care Act, visit

For a comprehensive analysis of the ACA, and additional information on health reform and other developments in employee benefits, just click here.


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