Government Share of ACA Premium Hikes Adds $194 Billion to Federal Deficit

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The Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation (JCT) issued a report Tuesday on the effect of terminating payments of cost-sharing reductions (CSRs) to health insurers as required under the Affordable Care Act (ACA), or Obamacare. The House Democratic Leader and the Democratic Whip requested the estimate.

The ACA requires insurers to offer plans with reduced deductibles, copayments, and other means of cost sharing to some of the people who purchase plans through the marketplaces established by the legislation. The size of those reductions depends on those people’s income. In turn, insurers receive federal payments arranged by the Secretary of Health and Human Services to cover the costs they incur because of that requirement.

According to CBO and JCT’s projections, for single policyholders, gross premiums (that is, before premium tax credits are accounted for) for silver plans offered through the marketplaces would, on average, rise by about 20% in 2018 relative to the amount in CBO’s March 2016 baseline and rise slightly more in later years.

Total federal subsidies for health insurance in the nongroup (i.e., individual market)—in particular, the sum of the premium tax credits and the CSR payments—would increase for two reasons: The average amount of subsidy per person would be greater, and more people would receive subsidies in most years. The cost of the premiums would be offset by CSRs unless President Trump makes good on his plan to eliminate CSR payments.

Implementing CSR payments  would increase the federal deficit, on net, by $194 billion from 2017 through 2026, according to the CBO and JCT estimate.

The full CBO/JCT report is available at the CBO website.