In May 2018, the Congressional Budget Office (CBO) released its report on federal subsidies for health insurance coverage for people under the age of 65. The report included predictions related to subsidies provided by the government that help offset the cost of health insurance coverage.
Projected Health Insurance Coverage
According to the numbers compiled by the CBO, approximately 244 million people under the age of 65 have health insurance in 2018 each month. About 66 percent of those people obtain coverage through their employer while about 25 percent are covered under Medicaid or Children’s Health Insurance Program (CHIP). Approximately 9 percent will gain coverage through the insurance marketplace while the remaining population will get coverage from nongroup sources.
Because Public Law 115-97, which was originally known as the Tax Cuts and Jobs Act, eliminated the penalty associated with the individual mandate implemented under the Affordable Care Act, the number of uninsured citizens is expected to rise by 3 million, mainly because people will choose not to carry health insurance. The reduction in uninsured people will also rise due to higher premiums that are expected in 2019.
Between 2019 and 2028, the CBO predicts that the number of insured Americans will decrease to 243 million, meaning that the uninsured population will increase from 29 million to 35 million. Around 13 percent of people under the age of 65 will be uninsured.
Projected Healthcare Subsidies
Federal subsidies for 2018 are expected to be $685 billion, approximately 3.4 percent of the gross domestic product (GDP). The CBO predicts that those numbers will rise at about 6 percent per year between 2018 and 2028, reaching $1.2 trillion or 3.9 percent of the GDP in 2028. For the period reviewed in the report, net subsidies are expected to total $9.3 trillion with two types of costs accounting for the total. The first is federal spending for people under 65, projected to be $4.0 trillion, which includes $842 billion for those who become eligible for Medicaid under the ACA as well as $143 billion for CHIP enrollees. The second is federal subsidies for work-related coverage, which are expected to amount to $3.7 trillion.
Stability of the Insurance Markets
In most areas of the country, the CBO says that the insurance market is stable and it’s expected to remain that way. In 2018, coverage was available through the marketplace in all areas, although about 25 percent enrollees only have access to one plan. If insurers begin to exit the marketplace, this could threaten stability. Premiums are increasing, according to the CBO, but most enrollees are insulated from those increases due to subsidies. As long as the subsidies remain in place and can offset the cost of rising premiums, the market is anticipated to remain stable.
Premium Increase Projections
The average premium for a benchmark plan increased by 34 percent in 2018 compared to the same plan in 2017. There were three factors identified by the CBO for the premium increase:
- More Americans live in an area of the country with just one insurer option on the marketplace;
- Cost-sharing reductions are no longer provided to insurance companies through direct payment; and
- People assume that the individual mandate, which has been eliminated starting in 2019, will not be enforced for this year.
The CBO predicts that premiums will increase by 15 percent between 2018 and 2019. That prediction includes the consumers who will choose not to carry health insurance once the individual mandate is eliminated. Premium costs are expected to increase an average of 7 percent per year between 2019 and 2028. However, people who are eligible for subsidies are projected to see premiums that are lower or at least rise in cost less rapidly than those who don’t qualify for financial assistance.
Changes Since September 2017
Since September 2017, the CBO found that the number of uninsured people has increased. They also learned that enrollment in subsidized and unsubsidized nongroup coverage is lower along with a lower enrollment in Medicaid. However, employer-provided coverage has increased since September 2017. The primary reason for the reduction in coverage is the elimination of the penalty for the individual mandate. For this report, the CBO used revised methods for estimating the effects of eliminating the individual mandate penalty. Overall, the CBO predicts that the number of people who will not have insurance by 2028 is around 5 million more than they originally predicted.
New Methods for Estimating
In the past, the CBO attributed only a small portion of the decline to financial factors that reduced the cost of coverage. These included the expansion of publicly financed coverage by Medicaid, the availability of subsidies and the financial incentive (tax penalty) of the individual mandate.
Non-financial factors were considered the reason for a decline in coverage, such as ease of access to the marketplace, simplified procedures to enroll in Medicaid, outreach to the public and broadened coverage. The tendency for the American people to comply with laws as well as the belief that all people should receive healthcare coverage were included in the agency’s predictions based on non-financial factors.
In this report, the CBO found that nonfinancial factors have a smaller effect on whether someone has insurance and that nonfinancial factors related to the mandate have less of a total effect than other financial factors. In short, the CBO believes that people are less sensitive to the repeal of the mandate when it comes to signing up for coverage.
Overall, the CBO projects that the elimination of the tax penalty for not having insurance as well as increased premiums may lead to 5 million more uninsured people in the United States by 2028. However, the agency says that it is difficult to predict accurately how many people will be uninsured over the next decade. Not only does the number of people who need insurance vary, but governmental changes over the next decade could have an impact on the number of uninsured.