In its latest projections for Obamacare, the Congressional Budget Office has lowered the law’s costs over the next 10 years by more than $100 billion.
Most of the change can be linked to lower spending on tax subsidies for coverage purchased on HealthCare.gov and its state counterparts, which can in turn be linked to lower-than-expected premiums.
CBO projected that the federal government would spend $164 billion less than previously expected on Obamacare subsidies by 2024. It appears that a number of factors contributed to that change. Premiums, especially in the near term, are expected to be lower than previously projected: The office estimated premiums would rise on average by about $100 in 2015. They are still expected to rise over the next decade, but at a lower rate than previously thought.
It’s a combination of rising medical costs, a healthier enrollment population in 2015 and the make-up of the Obamacare plans, which have narrower provider networks and lower provider payments than their counterparts in the large-group market, that contribute to the CBO’s calculations on premiums. Other changes, such as a smaller under-65 population, also factored into the revisions.
The savings on subsidies are somewhat offset by other revisions by CBO, including fewer individual mandate penalty payments and an estimated increase in the number of active workers with employer-based coverage (about 1 million per year), which decreases expected federal revenues.
The net effect is that the law is projected to cost $104 billion less over 10 years than CBO’s most recent estimate in February 2014.