A new Congressional Budget Office report that forecasts budgetary and economic conditions for 2014 provides ammunition for supporters of the Affordable Care Act on a couple of fronts. The first is that the “risk corridors” in the law will save the federal government billions of dollars:
Congressional Republicans are contemplating taking the economy hostage unless Democrats agree to repeal a temporary program built into the law called “risk corridors.” The is actually a financial shock absorber meant to shield consumers from premium hikes stemming from insurance industry uncertainty during the health law’s first three years, and Republicans have previously supported more generous versions of the program for Medicare. Now, they’re slamming it as a “taxpayer-funded bailout” of insurance companies under the ACA.
But CBO’s new report finds that the provision will actually save taxpayers and the government a considerable amount of money. Under the risk corridor program, the government takes a cut of the profits from insurance plans that set their premiums too high and redistributes it to insurers that set their premiums too low so that those companies won’t be forced to raise consumers’ monthly rates. According to CBO, “risk corridor payments from the federal government to health insurers will total $8 billion and the corresponding collections from insurers will amount to $16 billion, yielding net savings for the federal government of $8 billion.”
CBO had previously estimated that risk corridors would be budget neutral. Now, the agency predicts that insurance companies are likely to set their monthly premiums too high relative to how much they will have to pay out in medical costs.
The second is that premiums on policies obtained through the health care exchanges are considerably lower than previously predicted:
The Obama administration argued last year that ACA marketplace premiums would be lowerthan the CBO originally expected. The organization confirmed that on Tuesday, reporting that current marketplace premiums are actually 15 percent cheaper than it predicted last year.
A recent analysis by the consulting firm PricewaterhouseCoopers (PwC) found that the most Silver, Gold, and Platinum plans sold through ACA marketplaces are anywhere from $61 to $1377 cheaper than the average employer-sponsored health plan. An Obamacare Silver plan could be close to $2500 per year cheaper than an employer policy, according to PwC.
That doesn’t mean every single person will have lower premiums, of course, but most people will. Especially people like me, buying an individual policy on the exchange.
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