CBO sees high ACA subsidies cutting group health enrollment
Officials also explain why U.S. health care costs have grown more slowly than they expected.
Analysts at the Congressional Budget Office believe that maintaining the current premium subsidy levels for individual health coverage could cut enrollment in employment-based coverage by about 3.5 million people, or 2% of total enrollment.
The CBO gave that estimate in a set of answers to questions posed by three senators in July in response to testimony at a Senate hearing by Phillip Swagel, the CBO’s director.
Congress established the original health premium tax credit subsidy levels in the Affordable Care Act, in 2010. It later increased the subsidy level in legislation passed in after the COVID-19 pandemic hit.
Keeping the premium tax credit subsidies at the current, relatively high levels would be especially likely to reduce enrollment in employment-based coverage for workers in small, newly formed firms, officials said.
“The premium tax credit reduces employers’ incentive to offer health insurance to attract and retain workers,” officials added. “In CBO’s modeling, employers are less likely to offer health insurance when the credit subsidizes coverage through the marketplaces to a greater extent than under current law.”
But the CBO staff also believes employment-based coverage will continue to be the most common form of health coverage, even if Congress makes the current ACA subsidy levels permanent, officials said.
The CBO is a non-partisan arm of Congress that helps lawmakers analyze bills and other matters that could affect federal spending and federal revenue.
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The Urban Institute previously looked at the question and estimated maintaining current premium tax credit subsidy levels could decrease the number of people with employer-sponsored health coverage by about 4 million.
The CBO has estimated that making the current premium tax credit subsidies permanent would add $335 billion to the federal budget deficit over the period from 2025 through 2035, or an average of about $4,900 per year for the 6.9 million people who would use the extra subsidy help to pay for health overage.
CBO officials also answered a question about why overall health care costs have grown more slowly than it expected.
One reason is that drug costs increased less than expected, partly because the number of new drugs introduced was smaller than analysts had predicted.
Another reason is that fewer people with Medicaid used facility care, and fewer people living in the community ended up needed long-term care.