CBO Cuts Projected Number of ACA Exchange Participants

By Jonathan Nicholson

The nonpartisan Congressional Budget Office has cut by a third its projection of the number of people expected to get their insurance from the Affordable Care Act’s individual exchanges in 2017.

The CBO said it now forecasts about 10 million people a month on average—with 9 million qualifying for subsidized premiums—will be on the exchanges in 2017. That’s down from the 15 million—with 12 million subsidized—that had been predicted in March 2016. The new projections are in the CBO’s annual budget and economic outlook released Jan. 24.

The report’s budgetary forecast is only slightly changed from the CBO’s last look at the fiscal situation in August 2016. It says the fiscal 2017 deficit will fall slightly, to $559 billion from $587.3 billion in fiscal 2016, thanks to lower-than-expected Medicare spending. It will fall further in 2018 before rising again through the rest of the 10-year budget window, hitting $1.408 trillion in 2027. That would be close to the nominal record of $1.413 trillion set in 2009.

Less Economic Slack

On the economic front, the CBO said growth in the next two years will remain at the “modest” pace seen since the last recession ended in 2009 but will still reduce the amount of slack in the economy.

“The result would be increases in hiring, employment, and wages along with upward pressure on inflation and interest rates,” the CBO said.

CBO Deputy Director Mark Hadley said the drop in projected ACA enrollment means little change in CBO’s estimates of the nation’s number of uninsured, as only the composition of how people received insurance will change. He said fewer people are expected to sign up for the exchanges, but more people will be covered by their employers than CBO previously thought.

“We think that some folks that aren’t going to receive insurance [through] the exchanges will receive it through employment-based insurance,” Hadley said.

Overall, the number of uninsured people under age 65 is expected to be 27 or 28 million from 2017 to 2027, the CBO said. In March 2016, the agency had projected 28 million uninsured in 2026.

‘Appropriately Pricing.’

Despite the drop in the number of people on the exchanges, the cost of providing subsidies for their insurance premiums is expected to remain about the same as the CBO previously projected. Total federal net health subsidies over 10 years remains at $919 billion in the new report, but the cost of the largest component, premium subsidies, rises to $606 billion from $568 billion, even though the number of people expected to get the premium subsidies is now expected to be dramatically lower.

“We think premiums for the second-lowest, the silver plans, the national average for those plans, rose 21 percent,” Hadley said. But he said that rise was more likely due to insurers raising prices to reflect their experience with customers in the exchanges rather than a long-term trend.

“What we think is happening, for the most part, is plans are taking that information on board and appropriately pricing the products they have, given the mix of individuals participating in those plans,” he said. “We expect going forward that this is going to be, after this adjustment has occurred, that plan increases, that premiums you would expect in the future, would be more in the range of 5 or 6 percent.”

‘Real Challenges’ to Growth

Elsewhere in the report, the CBO said it expects the employment shortfall—defined as the difference between actual employment and maximum employment sustainable over the long run—to fall from 1.6 million in the fourth quarter of 2016 to zero by the end of 2018 as workers returned to the labor force.

Despite that, though, CBO Director Keith Hall said getting economic growth up to 4 percent annually on a consistent basis—one way Republicans in Congress and the White House hope to offset the costs of tax cut plans—would be difficult, given trends in productivity and especially an aging labor force.

“Getting significantly higher growth has got some real challenges,” Hall said.

Over the 2017-2026 period, the CBO projects deficits totaling about $8.6 trillion, or about $6 billion more than it forecast in August. The debt-to-gross domestic product ratio, a measure of debt burden, is projected to hit 88.9 percent in 2027, up from 85.5 percent in 2026 in the August report.

To contact the reporter on this story: Jonathan Nicholson in Washington at jnicholson@bna.com

To contact the editor responsible for this story: Paul Hendrie at pHendrie@bna.com

For More Information

The CBO report is available at http://src.bna.com/lDU

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