CBO Lowers Estimate of Number of Uninsured Due to Republican Tax Law

May 25, 2018

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Source: Washington Examiner

The government’s scorekeeping agencies revised their controversial estimate for how many more people would be uninsured as a result of changes Republicans and the Trump administration made to Obamacare.

The latest estimates project that zeroing out Obamacare’s fine for going uninsured alone will result in roughly 8.6 million more people becoming uninsured by 2027 than if the fine had been kept in place, compared to the 13 million figure the agencies had released several months ago.

The study, which comes from the Congressional Budget Office and the Joint Committee on Taxation, makes various projections about different ways that people are expected get health insurance, using different baselines than in previous iterations and taking into account other consumer and health insurance behavior observed during the past year.

The agency arrives at an even lower number of projected uninsured, 5 million, by taking into account other changes that the Trump administration plans to make, including by offering plans outside of Obamacare.

One of the main provisions it takes into account is Republicans’ eliminating Obamacare’s mandate penalties for being uninsured in the tax bill President Trump signed into law last year. The CBO now believes that removing the individual mandate’s penalties will be less consequential than it did previously.

In arriving at the previous 13 million figure for people who would be uninsured as a result of the fine’s repeal, the agencies took into account different ways that people obtain health insurance coverage: through Obamacare marketplaces, through a job and through government-funded Medicaid.

Left unchanged in the latest report is the assumption that 2 million people who have the option to receive health insurance from a job would choose to go without it now that there is no fine for being uninsured.

But other assumptions changed or were influenced by various actions from the Trump administration and states. Previously, the agencies estimated that 5 million fewer people would be enrolled in Medicaid, which is almost fully paid for by the government. Fewer people would enroll, they assumed, because a portion of enrollees who think they have to buy health insurance or otherwise face a fine head to the exchanges. There, they learn they qualify for no-cost Medicaid coverage instead.

The agencies still believe some of that behavior will be at play, but they have lowered their projections to 1 million fewer people enrolled in Medicaid. Within that estimate, however, is incorporated the fact that the agencies believe more states will move to expand the Medicaid program. By 2028, about two-thirds of the people who are eligible for Medicaid under Obamacare will be enrolled throughout the country, the report said. Currently, 55 percent of the eligible population is enrolled, because people who do not have it live in states where it is not available.

For the Obamacare exchanges, the CBO had projected 5 million fewer people would be enrolled, and instead uninsured, because analysts expected that healthier people would choose to go uninsured rather than purchase coverage once the fine was gone. In the latest estimate, the projection dropped to between 2 and 3 million, partly because people would choose to go uninsured or would be unable to pay for the higher costs of health insurance that result from healthier people abandoning the market.

These prices are expected to rise by an average of 15 percent and then at 7 percent each subsequent year, largely due to the mandate repeal. For the latest estimate, the agencies took into account that many enrollees receive subsidies that protect them from personally paying for any increases in the price of coverage. Actions by the Trump administration have made subsidies more generous for certain groups of enrollees, which keeps them enrolled and can even encourage more to enroll down the line.

The previous higher estimates on the effect of Obamacare’s fine played a critical role in the two major legislative debates last year — healthcare and taxes. During the healthcare debate, the CBO and JCT’s assumptions about the mandate were a major part of its projections that Republican plans to repeal and replace the law would significantly increase the number of uninsured Americans.

Republicans criticized the CBO, questioning its assumptions that low-income people who could qualify for free or near-free care would forgo coverage just because the fine would be going away.

The projections became a central line of attack from Democrats and pro-Obamacare activists, and helped give centrist Republicans cold feet about unraveling the law. On the flip side, in crafting their tax law, Republicans took advantage of the CBO’s big assumptions about the mandate to help their budgetary math, because fewer people claiming subsidies meant savings to the federal government. On the flip side, a lower number of uninsured would mean that the tax law results in less savings than Republicans touted.

The fact that the JTC and CBO were revisiting their analysis was announced openly by the agencies, as was the fact that the agencies expected their future projections about the uninsured to be lower.

Most people who buy health insurance through the exchanges, such as healthcare.gov, are insulated from the rise in premiums because the federal government provides subsidies that increase as the prices of health insurance increase.

But others are excluded and either pay the full increase, go uninsured, or buy health insurance with fewer consumer protections. Under Obamacare, a person making more than $48,240 does not qualify for subsidies.

The latest estimates take into account other actions by the Trump administration likely to inject further political attacks on both sides. For instance, Trump ended cost-sharing reduction payments, causing insurers in 2017 to charge the federal government more for certain premiums. Because of this change, about 2 million more people are estimated to purchase coverage on the exchanges than would have if Trump had not ended the payments, leading in part to the lower number of uninsured previously projected. To many enrollees on the exchanges, health insurance is less expensive because the federal government kicks in more.

The total enrollment figures also take into account planned moves by the Trump administration to offer different kinds of plans outside of Obamacare to people who don’t receive coverage through work or through a government program. One of the plans is known as a short-term plan, which 2 million people are expected to enroll in, and the other is an association health plan, which 6 million people are estimated to enroll in.

Each of these options is less expensive than Obamacare, but do not offer the same range of coverage or consumer protections. Still, the agencies project that a fraction of those enrolled, or 500,000 of 8 million, would be considered to have flimsy coverage that would put them at risk should they have a costly medical condition or accident.

The exodus of people from the exchanges to one of these plans would increase premiums on the exchanges by between 2 percent and 3 percent.

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