CBO Report: Bad News for Affordable Care Act

The Congressional Budget Office in Washington DC this week issued a special report on the economic outlook, including how the Affordable Care Act might affect jobs, sparking a new debate on the controversial healthcare reform law.

Respected on both sides of the aisle for non-partisan analysis, CBO forecast that generous ACA insurance premium subsidies and other factors would cut the number of hours worked by Americans by the equivalent of over 2 million jobs by 2021.

While supporters and opponents of the law put their own spin on the report there was no parsing the key finding: the healthcare reform law could adversely affect jobs.

Almost overlooked was another interesting CBO conclusion—because of the fumbled launch of the health insurance exchanges 2014 enrollment is expected to come in at 6 million, 1 million fewer people than the initial forecast. By 2024 total exchange enrollment would reach 24 million, good as far as it goes, but it would still leave some 31 million uninsured. And employment-based coverage would have dropped by 7 million.

The CBO report helped re-focus the ACA spotlight on how the federal and state exchanges are doing with this year’s March 31 deadline approaching for open enrollment.

Three Decisive Percentages—
Based on published reports we now understand that the success of the exchanges will turn on what happens to enrollment data on 3 key percentages: percent aged 18-34; percent previously uninsured; and percent paying their insurance premium, every month and on time.

The preliminary numbers are not encouraging. With 3 million people so far signed up for private health plans in federal and state exchanges the 3 key percentages shape up like this:
• Less than 25% of the enrollees by Dec 28 were between the ages of 18 and 34 (Wall Street Journal Jan 14, 2014). Financial viability for exchange plans requires that about 40% of the people who buy exchange coverage be young and healthy, “cross-subsidizing” affordable premiums for older
enrollees.
• McKinsey & Co. estimates that only 11% of those who bought coverage on an exchange by the end of December were previously uninsured (Wall Street Journal Jan 18-19, 2014). Others may put the figure higher, perhaps in the 25% range, but it seems clear that most of those enrolling in the exchanges had individual or employer coverage last year, i.e., they were not uninsured.
• While premium payment data are not yet available, anecdotal information from several insurance carriers suggests that about one-third to one-half of those who signed up for coverage had not paid their January premium (Wall Street Journal Jan 11-12, 2014).

Obviously the Affordable Care Act is more than a numbers game. And the numbers will almost certainly improve as next month’s open enrollment deadline approaches.

But the incoming data remind that a cloud of uncertainty hangs over many aspects of the healthcare reform law, including its effect on employer-based coverage. The CBO report adds a new layer of ACA uncertainty and confirms that 2014 could be a political make-or-break year.