CONGRESS OF THE UNITED STATES CONGRESSIONAL BUDGET OFFICE Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2017 to 2027 Health Insurance Subsidies in 2017 for People Under Age 65 Medicaid and Children’s Health Insurance Program Work-Related Coverage Medicare Nongroup Coverage 0 100 200 300 400 Billions of Dollars September 2017 Notes As referred to in this report, the Affordable Care Act comprises the Patient Protection and Affordable Care Act (Public Law 111-148), the health care provisions of the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152), and the effects of subsequent judicial decisions, statutory changes, and administrative actions. Numbers in the tables and figures may not add up to totals because of rounding. Unless the report indicates otherwise, all years referred to in describing estimates of spending and revenues are federal fiscal years, which run from October 1 to September 30 and are designated by the calendar year in which they end. Estimates of health insurance coverage reflect average monthly enrollment during a calendar year and include spouses and dependents covered under family policies. Those estimates are for the noninstitutionalized civilian population under age 65. Supplemental data for this report are available on CBO’s website (www.cbo.gov/ publication/53091). www.cbo.gov/publication/53091 Contents Summary 1 How Many People Under Age 65 Are Projected to Have Health Insurance? 1 How Large Are the Projected Federal Subsidies, Taxes, and Penalties Associated With Health Insurance? 2 How Stable Is the Nongroup Health Insurance Market Projected to Be? 2 What Are Premiums in the Nongroup Health Insurance Market Projected to Be? 2 Projected Health Insurance Coverage 3 Employment-Based Coverage 3 Medicaid and CHIP 3 Nongroup Coverage and the Basic Health Program 5 Medicare and Other Coverage 7 Uninsured7 Projected Subsidies for Health Insurance Coverage 8 Work-Related Coverage 8 Medicaid and CHIP 9 Nongroup Coverage and the Basic Health Program 9 Medicare10 Taxes and Penalties 10 Changes in the Estimates of Insurance Coverage and Subsidies Since March 2016 12 Changes in the Estimates of Insurance Coverage 12 Changes in the Estimates of Subsidies 17 About This Document 19 Figures 1. Health Insurance Coverage in 2017 for People Under Age 65 2 2. Health Insurance Subsidies in 2017 for People Under Age 65 9 Tables 1. Health Insurance Coverage for People Under Age 65 4 2. Net Federal Subsidies Associated With Health Insurance Coverage for People Under Age 65 10 3. Comparison of Current and Previous Estimates of Health Insurance Coverage and Net Federal Subsidies for People Under Age 65 14 Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2017 to 2027 Summary CBO’s most recent report comparable to this one was The federal government subsidizes health insurance for published in March 2016; it described the projections most Americans through a variety of programs and tax underlying CBO’s March 2016 baseline.2 For 2026, provisions. In 2017, net subsidies for people under age the agencies’ projection of the number of people 65 will total $705 billion, the Congressional Budget obtaining subsidized coverage through the marketplaces Office and the staff of the Joint Committee on Taxation is now 4 million smaller, and the projected number (JCT) estimate. of uninsured people is now 3 million larger, than they were in CBO’s March 2016 baseline projections. In order to project the future cost to the federal govern- The projection of net federal subsidies for health ment of providing those subsidies, CBO and JCT have insurance from 2017 to 2026 is $88 billion lower. The projected the number of people under age 65 with health largest contributor to that decrease involves subsidies insurance of various kinds. They have then projected the for nongroup coverage (that is, insurance purchased federal costs associated with each kind of subsidy under individually) and the Basic Health Program, which are current law, including the cost of preferential tax treat- now projected to cost $137 billion less than the agencies ment for employment-based coverage, the cost of provid- projected in March 2016. ing Medicaid coverage to people under age 65, and the size of government payments for other kinds of health How Many People Under Age 65 Are Projected to insurance coverage—such as plans purchased through Have Health Insurance? the marketplaces established under the Affordable Care According to CBO and JCT’s estimates, a monthly Act (ACA). (The government also bears significant costs average of about 244 million noninstitutionalized civil- for health insurance for people age 65 or older, mostly ians under age 65 will have health insurance in 2017. through Medicare and Medicaid, as CBO has reported Almost two-thirds of them will have coverage through elsewhere.) an employer, and about a quarter will be enrolled in Medicaid or the Children’s Health Insurance Program CBO has used these new estimates to adjust its current (CHIP). A smaller number will have nongroup cover- baseline budget projections, which incorporate the age, coverage that is provided by Medicare, or coverage assumption that current law generally remains in place. obtained from various other sources. On average, about Specifically, CBO has updated its baseline projections 28 million people—10 percent of all noninstitution- of the federal cost of subsidizing health insurance alized civilians younger than 65—will be uninsured in purchased through the marketplaces, of spending to 2017, CBO and JCT estimate (see Figure 1). Between subsidize insurance provided through the Basic Health 2017 and 2018, the number of uninsured people rises Program, and of net spending and revenues associated by 2 million in the agencies’ projections, mainly because with stabilizing premiums for insurance purchased by premiums in the nongroup market are expected to be individuals and small employers. Because of the extensive higher. work required to analyze pending legislation over the past eight months, CBO and JCT did not have time to From 2018 through 2027, the number of people with prepare these new estimates before CBO published the coverage is expected to grow from 242 million to most recent report about its baseline budget projections 247 million. But the number of uninsured people is also for the federal budget as a whole in June 2017.1 expected to grow, from 30 million to 31 million, keeping 2. Congressional Budget Office, Federal Subsidies for Health 1. See Congressional Budget Office, An Update to the Budget and Insurance Coverage for People Under Age 65: 2016 to 2026 Economic Outlook: 2017 to 2027 (June 2017), www.cbo.gov/ (March 2016), www.cbo.gov/publication/51385. publication/52801. 2 Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2017 to 2027 September 2017 Figure 1 . Other projected subsidy costs are smaller: Health Insurance Coverage in 2017 for People ■■ Medicare benefits for noninstitutionalized Under Age 65 beneficiaries under age 65 (net of their premium payments and other offsetting receipts) are projected Employment-Based Coverage to amount to $1.0 trillion. Such spending is primarily for people who are disabled. Medicaid and CHIP ■■ Subsidies for coverage obtained through the Nongroup Coverage marketplaces or through the Basic Health Program are estimated to total $0.8 trillion. Medicare In the agencies’ projections, the costs of the subsidies are Other offset to a small extent, $0.5 trillion, by taxes and penal- Uninsured ties collected from health insurance providers, uninsured people, and employers. 0 40 80 120 160 Millions of People How Stable Is the Nongroup Health Insurance Market Projected to Be? Sources: Congressional Budget Office; staff of the Joint Committee on CBO and JCT expect the nongroup health insurance Taxation. market to be stable in most areas of the country. Prelim- CHIP = Children’s Health Insurance Program. inary data for 2018 show that insurers will offer cover- age in all or almost all areas. Although premiums have the uninsured share of the under-65 population stable at been increasing, most subsidized enrollees buying health 11 percent. insurance through the marketplaces are insulated from those increases because their out-of-pocket payments for How Large Are the Projected Federal Subsidies, premiums are based on a percentage of their income; Taxes, and Penalties Associated With Health the federal government pays the difference between that Insurance? percentage and the premium for a benchmark plan. CBO and JCT currently estimate that in 2017, the (A benchmark plan is the second-lowest-cost silver federal subsidies, taxes, and penalties associated with plan in an area; a silver plan, in turn, is one that pays health insurance coverage for people under age 65 will an average of 70 percent of the costs of covered health result in a net subsidy from the federal government of care services to certain beneficiaries.) Those subsidies— $705 billion, which would be equal to 3.7 percent of combined with the effects of the individual mandate, gross domestic product. That amount is projected to rise which requires most people to have insurance or pay a at an average annual rate of 5.0 percent between 2017 penalty, and other factors—are anticipated to result in and 2027, reaching $1.2 trillion (or 4.1 percent of gross demand for insurance by enough people, including peo- domestic product) in 2027. For the entire 2018–2027 ple with low health care expenditures, that the number period, the projected net subsidy is $9.2 trillion. Two of insurers in the marketplaces would stabilize and insur- types of costs account for most of that amount: ers would be willing to sell nongroup policies in almost all areas of the country throughout the next decade. ■■ Federal spending for people under age 65 with full Medicaid and CHIP benefits (excluding people who What Are Premiums in the Nongroup Health reside in a nursing home or other institution) is Insurance Market Projected to Be? projected to amount to $4.0 trillion. That amount CBO and JCT expect premiums for benchmark plans— includes $1.0 trillion for people who would be made which are the basis for determining subsidies—to eligible for Medicaid by the ACA. increase by an average of 5 percent per year between 2017 and 2027. In 2018, the agencies project, the ■■ Federal subsidies of work-related coverage for people average benchmark premium will be roughly 15 percent under age 65, which stem mainly from the exclusion higher than it was in 2017, largely because of short-term of most premiums for such coverage from income market uncertainty—in particular, insurers’ uncertainty and payroll taxes, are projected to equal $3.9 trillion. about whether federal funding for certain subsidies that September 2017 Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2017 to 2027 3 are currently available will continue to be provided— part by health insurance premiums’ growing faster than and an increase in the percentage of the population wages over the long term.4 living in areas with only one insurer in the marketplace. Following the laws that govern the construction of its Medicaid and CHIP baseline, CBO has included funding for those subsidies The next-largest source of coverage among people under in its baseline projections.3 Because of the assumed age 65 is Medicaid. In 2017, CBO estimates, a monthly continuation of those payments, the agencies project average of 63 million noninstitutionalized people will that insurers’ uncertainty about the payments would receive full Medicaid benefits.5 By 2027, that number is be resolved before 2019 and that insurers would set projected to grow to 70 million people (17 million who 2019 premiums at levels that are not affected by similar would be made eligible through the ACA’s optional state uncertainty. As a result, the projected average premiums expansion of Medicaid coverage, and 53 million who for benchmark plans are slightly lower in 2019 than in would be otherwise eligible). 2018. CBO estimates that 6 million people, mostly children Projected Health Insurance Coverage but also a few pregnant women, will be enrolled in CBO and JCT project that, on average during 2017, CHIP in 2017, on average. That number falls to about 90 percent of the noninstitutionalized civilian popu- 2 million in 2027, as CHIP funding projected in lation under age 65 will have health insurance, mostly CBO’s baseline declines sharply.6 (Most of the decline from employment-based plans and Medicaid. Other in coverage through CHIP is projected to be offset sources of coverage include CHIP, nongroup policies, by increased enrollment in Medicaid or in insurance and Medicare. Over the 2018–2027 period, a slightly purchased through the marketplaces or offered by an lower percentage of that population is projected to be employer.) Together, Medicaid and CHIP are projected to insured. provide insurance coverage for about one-quarter of the population under age 65 in 2027. Employment-Based Coverage The most common source of health insurance for the CBO’s estimates of Medicaid enrollment over the next noninstitutionalized civilian population under age 65 decade reflect the agency’s expectations that additional is a current or former employer—either one’s own or a states will expand Medicaid eligibility and that more family member’s. CBO and JCT estimate that in 2017, people will enroll in the program in states that have a monthly average of about 156 million people (or about already done so. Under the ACA, states are permitted to 57 percent of the population under age 65) will have employment-based coverage (see Table 1). That number 4. For discussion of that factor, see Employee Benefits Research is projected to decline to 151 million, or about 55 per- Institute, Employment-Based Health Benefits: Trends in Access cent of the population under age 65, in 2027. and Coverage, 1997–2010, Issue Brief 370 (April 2012), http://tinyurl.com/bvsvrbf; and Fredric Blavin and others, Most of the projected reduction in employment-based A Decade of Coverage Losses: Implications for the Affordable Care coverage is attributable to the ACA. The agencies expect Act (Urban Institute, February 2012), http://tinyurl.com/ ycnfv4k6. that as a result of the ACA, some employers will decline to offer coverage and some employees will elect to forgo 5. Some enrollees receive only partial benefits from Medicaid. They offers of employment-based coverage in favor of other include Medicare enrollees who receive only assistance with out- of-pocket payments and Medicare premiums, people who receive sources, such as Medicaid. Another factor is a gradual only family planning services, and unauthorized immigrants who decline in enrollment in employment-based coverage receive only emergency services. that started well before the ACA took effect, caused in 6. In fiscal year 2017, spending for CHIP will reach $16 billion, CBO estimates, but at the end of that year, federal funding for the program expires. Following the rules that govern baseline projections for expiring programs, CBO projects budget authority for CHIP after 2017 at about $6 billion per year, and the estimates of enrollment given here are based on that projected 3. CBO constructs its baseline in accordance with provisions of amount of funding. However, CBO anticipates that if lawmakers the Balanced Budget and Emergency Deficit Control Act of did not provide additional funding for subsequent years, all state 1985 (Public Law 99-177) and the Congressional Budget and CHIP programs would terminate at some point during fiscal Impoundment Control Act of 1974 (P.L. 93-344). year 2018. 4 Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2017 to 2027 September 2017 Table 1 . Health Insurance Coverage for People Under Age 65 Millions of People, by Calendar Year 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Total Population Under Age 65 272 273 273 274 274 275 276 276 276 277 277 Employment-Based Coverage 156 157 156 154 154 154 153 153 152 151 151 a Medicaid and CHIP Made eligible for Medicaid by the ACA 13 13 13 13 14 14 15 15 16 17 17 Otherwise eligible for Medicaid 50 51 52 52 52 52 52 52 53 53 53 CHIP 6 ___ 5 ___ 2 ___ 3 ___ 3 ___ 3 ___ 3 ___ 3 ___ 2 ___ 2 ___ 2 ___ Subtotal 69 68 67 68 68 69 70 70 71 72 73 Nongroup Coverage and the Basic Health Program Nongroup coverage purchased through marketplacesb Subsidized 8 9 10 10 10 10 10 10 10 10 10 Unsubsidized 2 ___ 2 ___ 2 ___ 2 ___ 2 ___ 2 ___ 2 ___ 2 ___ 2 ___ 3 ___ 3 ___ Subtotal 10 11 12 12 12 12 12 13 12 12 12 Nongroup coverage purchased outside marketplaces 6 ___ 5 ___ 5 ___ 5 ___ 5 ___ 5 ___ 5 ___ 5 ___ 5 ___ 5 ___ 5 ___ Total, nongroup coverage 17 16 17 18 18 18 18 18 18 18 18 c Coverage through the Basic Health Program 1 1 1 1 1 1 1 1 1 1 1 Medicared 8 8 8 8 9 9 9 9 9 9 9 e Other Coverage 4 5 5 5 5 5 5 5 5 6 6 f Uninsured 28 30 31 31 31 31 31 31 31 31 31 Memorandum: Number of Insured People 244 242 243 243 243 244 245 245 246 246 247 Insured as a Percentage of the Population Including all U.S. residents 90 89 89 89 89 89 89 89 89 89 89 Excluding unauthorized immigrants 92 91 91 91 91 91 91 91 91 91 91 Sources: Congressional Budget Office; staff of the Joint Committee on Taxation. Estimates include noninstitutionalized civilian residents of the 50 states and the District of Columbia who are younger than 65. The components do not sum to the total population because some people report multiple sources of coverage. CBO and JCT estimate that in most years, 10 million to 11 million people (or 4 percent of insured people) have multiple sources of coverage, such as employment-based coverage and Medicaid. Estimates reflect average monthly enrollment over the course of a year and include spouses and dependents covered under family policies. ACA = Affordable Care Act; CHIP = Children’s Health Insurance Program; JCT = Joint Committee on Taxation. a. Includes noninstitutionalized enrollees with full Medicaid benefits. Estimates are adjusted to account for people enrolled in more than one state. b. Under the ACA, many people can purchase subsidized health insurance coverage through marketplaces (sometimes called exchanges), which are operated by the federal government, state governments, or partnerships between the federal and state governments. c. The Basic Health Program, created under the ACA, allows states to establish a coverage program primarily for people with income between 138 percent and 200 percent of the federal poverty guidelines. To subsidize that coverage, the federal government provides states with funding equal to 95 percent of the subsidies for which those people would otherwise have been eligible through a marketplace. d. Includes noninstitutionalized Medicare enrollees under age 65. Most Medicare-eligible people under age 65 qualify for Medicare because they participate in the Social Security Disability Insurance program. e. Includes people with other kinds of insurance, such as student health plans, coverage provided by the Indian Health Service, and coverage from foreign sources. f. Includes unauthorized immigrants, who are ineligible either for marketplace subsidies or for most Medicaid benefits; people ineligible for Medicaid because they live in a state that has not expanded coverage; people eligible for Medicaid who do not enroll; and people who do not purchase insurance available through an employer, through the marketplaces, or directly from an insurer. September 2017 Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2017 to 2027 5 expand eligibility for Medicaid to adults under age 65 Health Insurance Marketplaces. The marketplaces are whose income is no more than 138 percent of the federal operated by the federal government, state governments, poverty guidelines (also known as the federal poverty level, or partnerships between the federal and state govern- or FPL). The federal government pays a larger share of the ments. People meeting certain criteria may receive costs for those people than it pays for those who would federal subsidies for coverage purchased through those have been eligible otherwise. In 2014, 26 states and the marketplaces. District of Columbia expanded their Medicaid programs under the ACA. Three more states did so in 2015, and In 2017, a total of 12 million people selected plans two more followed suit the following year. By the end of through the marketplaces by the close of the open- 2016, about half of the people in the country who met enrollment period established by the ACA; however, the new eligibility criteria resided in those states. CBO and JCT estimate that during that year, an average of about 10 million people will be covered each month In the near term, CBO expects, states’ uncertainty about by insurance purchased through the marketplaces.7 The the availability of funds to support Medicaid expan- agencies estimate that 8 million of those people will sions will make further expansions unlikely. But over receive subsidies to purchase their coverage. time, in the agency’s assessment, states will be much likelier to expand eligibility than to contract it, in large CBO and JCT expect average enrollment to continue to part because the federal government would pay at least increase—to 11 million people in 2018 and to 12 mil- 90 percent of the cost and because states have histori- lion people in almost every year from 2019 to 2027. In cally expanded Medicaid much more often than they 2018, about 9 million of those people are expected to have contracted it. (Continued interest in expansion is receive subsidies for purchasing that insurance, and that demonstrated by votes to do so by two more state legis- number is expected to be about 10 million in each year latures, though those measures were vetoed by the states’ from 2019 to 2027. governors.) In addition, CBO anticipates that states’ uncertainty would dissipate over time, provided that cur- The projected increase in enrollment in 2018 stems rent law did not change. CBO’s baseline incorporates the mainly from three factors: assumption that current law generally remains in place— and in the past, the longer a law has been in place, the ■■ On the basis of recent research, CBO and JCT more likely it has been that states believe it will remain expect that some people who are eligible for subsidies in place. During the next few years, the agency expects through the marketplaces are forgoing the subsidies that some states will work with the federal government and enrolling in nongroup coverage outside the to develop, review, and approve expansions. In CBO’s marketplaces.8 As premiums rise, the agencies baseline, more states are projected to expand coverage expect, some of those people will enroll in subsidized starting in 2020. By 2027, about 70 percent of the peo- coverage through the marketplaces instead. ple who meet the new eligibility criteria will live in states that have expanded Medicaid coverage, CBO projects. 7. CBO and JCT also estimate that average monthly enrollment during the year will be lower than the total number of people who will have coverage at some point during the year. The Nongroup Coverage and the Basic Health Program reason for the differences is that some people are covered for Nongroup insurance covers a much smaller share of only part of the year—because those who experience a qualifying the population under age 65 than employment-based life event (such as a change in income or family size or the coverage or Medicaid does. In 2017, a monthly average loss of employment-based insurance) are allowed to purchase of about 17 million people under age 65 are expected coverage later in the year, or because some people stop paying the premiums or leave their marketplace-based coverage as they to have such coverage, most of whom will have pur- become eligible for insurance through other sources. chased it through the marketplaces established under the ACA. (Nongroup policies can be purchased either 8. See Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, “About through the marketplaces—with or without government 2.5 Million People Who Currently Buy Coverage Off- subsidies—or elsewhere.) An additional 1 million people Marketplace May Be Eligible for ACA Subsidies,” ASPE Data are estimated to be participating in the Basic Health Point (October 4, 2016), https://go.usa.gov/xRFhm (PDF, Program, which allows states to offer subsidies to certain 330 KB); and John H. Goddeeris, Stacey McMorrow, and low-income people that are based on the subsidies avail- Genevieve M. Kenney, “Off-Marketplace Enrollment Remains able through the marketplaces. an Important Part of Health Insurance Under the ACA,” Health Affairs, vol. 36, no. 8 (August 2017), pp. 1489–1494, http://dx.doi.org/10.1377/hlthaff.2017.0085. 6 Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2017 to 2027 September 2017 ■■ Some children are projected to obtain subsidized through the marketplaces are insulated from those coverage through the marketplaces because funding increases because of the subsidies. Those subsidies— for CHIP projected in CBO’s baseline declines combined with the effects of the individual mandate, sharply at the end of 2017.9 the rules requiring insurers to offer coverage of preexist- ing medical conditions, the relative ease of comparison ■■ Some people who, in 2017, are enrolled in certain shopping in the marketplaces, and other factors—are plans that are offered outside the marketplaces and anticipated to produce sufficient demand for nongroup that do not comply with the ACA’s requirements are insurance, including among people with low health expected to newly enroll in subsidized marketplace care expenditures, to attract at least one insurer almost coverage in 2018, partly because some of those plans everywhere. As a result, in each of the next 10 years, the will no longer be available. agencies expect fewer than one-half of one percent of people in the country to live in areas where no insurers That increase in enrollment in 2018 is limited by participate in the nongroup market. projected premium increases due to near-term market uncertainty and by announced reductions in federal Moreover, data about insurers’ profitability in the first advertising, outreach, the enrollment period, and other quarter in 2017 are consistent with the market’s being enrollment efforts, which push enrollment down. stable.10 Insurers’ profitability, as measured by the share of premiums that goes toward their administrative costs In later years, enrollment is expected to be relatively and profits rather than paying for claims, has increased stable as a result of two largely offsetting effects. On the in 2017 to move closer to pre-ACA levels. That evidence one hand, CBO’s expectation that additional states will suggests that the premium increases in 2017 were a expand eligibility for Medicaid reduces the number of sufficient adjustment by insurers to account for the people projected to obtain coverage through the mar- underlying health risk of the nongroup population. ketplaces, because people who are eligible for Medicaid are not permitted to receive subsidies for such cover- Nevertheless, preliminary data indicate that a greater age. On the other hand, over the next few years, more percentage of people will be living in areas with only one employers are expected to respond to the availability of or two insurers in the marketplaces in 2018, following coverage through the marketplaces by declining to offer a large jump in that percentage in 2017. Several insurance to their employees. As a result, some of their factors may have led insurers to withdraw from those employees are expected to obtain coverage through the markets, including low enrollment, lack of profitability, marketplaces. uncertainty about the enforcement of the individual mandate, and uncertainty about the federal government’s Stability in the Marketplaces. Decisions about offering future payments for cost-sharing reductions (CSRs). and purchasing health insurance depend on the stability Those payments are currently provided to insurers of the health insurance market—that is, on the pro- that, following current law, reduce the out-of-pocket portion of people who live in areas with participating payments required from people who enroll in certain insurers and on the likelihood that premiums will not plans through the marketplaces and whose income is rise in an unsustainable spiral. In the marketplaces, generally between 100 percent and 250 percent of the where premiums cannot be based on enrollees’ health FPL; however, the outcome of a lawsuit challenging the status, the market for insurance would be unstable if, for legality of CSR payments has yet to be determined, and example, the people who wanted to buy coverage at any it is unclear whether the Administration will continue to offered price would have average health care expenditures make them.11 Still, with steady demand for insurance in so high that offering the insurance would be unprofitable for insurers. 10. See Cynthia Cox and Larry Levitt, Individual Insurance Although premiums have been increasing, most sub- Market Performance in Early 2017 (Kaiser Family Foundation, sidized enrollees purchasing health insurance coverage July 2017), https://tinyurl.com/y8m68ghz. 11. For an analysis under CBO’s March 2016 baseline of what 9. Again, in accordance with the rules governing baseline would happen if CSR payments were terminated, see projections, CBO projects funding for CHIP after 2017 at an Congressional Budget Office, The Effects of Terminating Payments annualized amount of $6 billion. If funding was at that level, for Cost-Sharing Reductions (August 2017), www.cbo.gov/ significantly fewer people would be able to enroll in CHIP. publication/53009. September 2017 Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2017 to 2027 7 the marketplaces, the agencies expect that the number of marketplace subsidies but instead enroll in unsubsidized insurers in the marketplaces would stabilize after 2018. coverage outside the marketplaces. Premiums in the Marketplaces. CBO and JCT estimate Basic Health Program. Under the ACA, states have that the average benchmark premiums for a 21-year- the option to establish a Basic Health Program, which old, a 45-year-old, and a 64-year-old who buy health is primarily for people whose income is between insurance coverage through the marketplaces are about 138 percent and 200 percent of the FPL. To subsidize $3,400, $4,800, and $9,800, respectively, in calendar that coverage, the federal government provides states year 2017. Those estimates represent a national average, with funding equal to 95 percent of the subsidies for reflecting the agencies’ projections of the geographic dis- which those people would have been eligible through a tribution of people who currently have coverage through marketplace. States can use those funds, in addition to the marketplaces. funds from other sources, to offer health insurance that covers a broader set of benefits or requires smaller out- The agencies expect insurers to raise premiums for of-pocket payments than coverage in the marketplaces marketplace plans in 2018 by an average of roughly does.14 So far, Minnesota and New York have each 15 percent, largely because of uncertainty about created a Basic Health Program. In total, about 1 million whether the federal government will continue to people are projected to be enrolled in such a plan in each fund CSR payments and because of an increase in year from 2017 through 2027. the percentage of the population living in areas with only one insurer. Following the laws that govern its Medicare and Other Coverage baseline, however, CBO has included that funding in Although Medicare is best known for providing coverage its baseline projections. Because of the continuation of for people age 65 or older, it also covers some people those payments, under that assumption in the baseline, who are under age 65. Many of those younger enrollees the agencies expect that by 2019 the uncertainty receive that coverage because they have qualified for surrounding CSR payments would be resolved and Social Security Disability Insurance benefits. (In general, insurers would set 2019 premiums at levels that did not people become eligible for Medicare two years after they include the 2018 uncertainty increase; therefore, average qualify for Disability Insurance.) Between 8 million premiums (and consequently subsidies) are projected to and 9 million people under age 65 are projected to be be lower in 2019 than in 2018. Between 2017 and 2027, covered by Medicare in 2017 and in each year over the the average benchmark premium is projected to grow by 2018–2027 period. an average of 5 percent per year on the basis of CBO’s projections of increases in disposable income and other Other miscellaneous sources of coverage account for factors that have historically been associated with growth 4 million to 6 million people each year from 2017 to in premiums.12 2027. Those sources include student health plans, cover- age provided by the Indian Health Service, and coverage Other Nongroup Coverage. Outside the marketplaces, from foreign sources. 6 million people are expected to purchase nongroup coverage in 2017, and 5 million people are projected Uninsured to do so in 2027.13 CBO and JCT estimate that in An average of 28 million people under age 65 are pro- most years, roughly 1 million people will be eligible for jected to be uninsured in 2017. (In this report, CBO and JCT consider people uninsured if they would not be covered by a policy or enrolled in a government 12. For discussion of how CBO and JCT project premiums, see program that provides financial protection from major Congressional Budget Office, Private Health Insurance Premiums medical risks.) and Federal Policy (February 2016), pp. 9–11, www.cbo.gov/ publication/51130. 13. Nongroup plans offered through the marketplaces and nongroup plans purchased directly from insurers are generally subject to 14. For more information about the Basic Health Program, see the same requirements. Also, in general, insurers must consider Centers for Medicare & Medicaid Services, “Basic Health all enrollees in nongroup plans that comply with the ACA’s Program” (accessed September 13, 2017), www.medicaid.gov/ requirements as members of a single risk pool. basic-health-program/index.html. 8 Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2017 to 2027 September 2017 Between 2017 and 2018, the number of uninsured ■■ Providing coverage through the Medicare program to people rises by 2 million in the agencies’ projections, people under age 65 who receive Disability Insurance mainly because premiums in the nongroup market are or who meet certain other criteria. expected to be higher. Over the next decade, roughly 1 out of every 10 residents under age 65 is projected The costs of those subsidies are partly offset by taxes and to be uninsured each year, and the number of people penalties related to health insurance coverage that the who are uninsured is projected to be 31 million in 2027 federal government collects. They include excise taxes on (see Table 1).15 In that year, according to CBO and high-premium insurance plans, penalty payments from JCT’s estimates, about 30 percent of those uninsured people who do not obtain coverage, excise taxes on pro- people would be unauthorized immigrants and thus viders of health insurance, and penalty payments from ineligible for subsidies through a marketplace or for large employers that do not offer health insurance that most Medicaid benefits; about 10 percent would be meets certain standards. ineligible for Medicaid because they lived in a state that had not expanded coverage; about 20 percent would Provided that current law did not change, the net be eligible for Medicaid but would not enroll; and the federal subsidy for health insurance coverage for peo- remaining 40 percent would not purchase insurance to ple under age 65—that is, the cost of all the subsi- which they had access through an employer, through the dies minus the taxes and penalties—would be about marketplaces, or directly from insurers. $705 billion in 2017 and would total $9.2 trillion over the 2018–2027 period, CBO and JCT estimate (see Projected Subsidies for Health Insurance Table 2). Those sums reflect projections by the agencies Coverage about choices that people would make about obtaining The federal government encourages people to obtain health insurance. health insurance by making it less expensive than it would be otherwise. For people under age 65, the Those estimates of subsidies are not equal to the savings government subsidizes health insurance coverage in four that the federal government would realize if lawmakers main ways: eliminated the subsidies. Estimates of such savings would have to incorporate expected changes in individual deci- ■■ Giving tax benefits for work-related coverage, sions and other behavioral responses to such a change in law. ■■ Providing roughly two-thirds of all funding for Medicaid (while requiring states to provide the Work-Related Coverage remainder), Health insurance that people receive from employers is the most common source of subsidized coverage for people ■■ Offering tax credits and other subsidies to certain under age 65. Employers’ payments for workers’ health people who purchase coverage through the health insurance coverage are a form of compensation, but insurance marketplaces, and unlike cash compensation, those payments are excluded from income and payroll taxes. In most cases, the amounts paid by workers themselves for their share of 15. The sum of the estimates of the number of people enrolled in health insurance plans and the number of people who are the cost of employment-based coverage are also excluded uninsured exceeds CBO and JCT’s estimate of the total population from income and payroll taxes. Another work-related under age 65 by 10 million to 11 million people in most years, subsidy is the income tax deduction for health insurance because some people will have multiple sources of coverage. A premiums that can be used by self-employed people, common example is people who report having both employment- including sole proprietors and workers in partnerships based coverage and Medicaid. To arrive at the estimates given (who may purchase insurance individually or as part of a here, CBO and JCT did not assign a primary source of coverage to people who reported multiple sources; the resulting amounts group). In addition, certain small employers that pro- align better with estimates of spending as well as with information vide health insurance to their employees are eligible to about health insurance coverage from household surveys. (By receive a tax credit of up to 50 percent of the cost of that contrast, when CBO and JCT have estimated changes in the insurance. sources of insurance coverage stemming from proposed legislation, the agencies have used only people’s primary source of coverage to count them, an approach that has generally proven more useful for JCT estimates that subsidies for work-related coverage that purpose.) will total about $287 billion in 2017 (see Figure 2). That September 2017 Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2017 to 2027 9 amount is estimated to grow to $487 billion in 2027 and Figure 2 . to total $3.9 trillion over the 2018–2027 period. The Health Insurance Subsidies in 2017 for People amount of the tax subsidy for work-related coverage is Under Age 65 very large because the number of people with such cov- erage is large. It is important to note that the estimated subsidies are not equal to the tax revenues that would be Medicaid and CHIP collected if those subsidies were eliminated, because in that event, many people would adjust their behavior to Work-Related Coverage reduce the tax liability created by the change. Medicaid and CHIP Medicare Outlays for all noninstitutionalized Medicaid and CHIP enrollees under age 65 who receive full benefits are estimated to amount to $296 billion in 2017.16 Nongroup Coverage Over the 2018–2027 period, estimated outlays total $4 trillion—$1 trillion (or 26 percent of the total) for 0 100 200 300 400 people whom the ACA would make eligible for Medicaid Billions of Dollars and roughly $3 trillion (or 74 percent) for people who would be eligible for Medicaid or CHIP otherwise. Sources: Congressional Budget Office; staff of the Joint Committee on Medicaid spending for the noninstitutionalized Taxation. population under age 65 accounts for roughly 80 percent CHIP = Children’s Health Insurance Program. of total projected Medicaid spending for medical services over the 2018–2027 period. Combined, the subsidies for nongroup coverage through the marketplaces and the Basic Health Program are Nongroup Coverage and the Basic Health Program projected to average $5,550 per subsidized enrollee in In 2017, subsidies for nongroup coverage obtained calendar year 2017 and to rise to about $8,600 in 2027. through the marketplaces, related spending and Subsidies for insurance obtained through the market- revenues—that is, premium tax credits, cost-sharing places depend on the number of people who purchase reductions, net spending and revenues related to risk such coverage; the premiums for benchmark plans; and adjustment and reinsurance, and grants to states—and certain characteristics of enrollees, such as age, family Basic Health Program payments will total $45 billion, size, and income. The subsidies fall into two categories: CBO and JCT estimate. Over the 2018–2027 period, premium tax credits and CSRs. The first category is pri- such costs are projected to total $773 billion and to con- marily available to people with income between 100 per- sist of the following main components: cent and 400 percent of the FPL who meet certain other conditions, and the second is generally available ■■ Outlays of $531 billion and a reduction in revenues to people who are eligible for premium tax credits, have of $75 billion for premium tax credits (which a household income below 250 percent of the FPL, and cover a portion of eligible people’s health insurance enroll in an eligible plan. premiums), totaling $605 billion; The risk-adjustment and reinsurance programs were ■■ Outlays of $99 billion for CSRs (which reduce out-of- established under the ACA to stabilize premiums in pocket payments for low-income enrollees); the nongroup and small-group insurance markets by reducing the likelihood that particular insurers with a ■■ Outlays of $69 billion for the Basic Health Program; disproportionate share of less healthy enrollees would and bear especially high costs.17 The programs, which were implemented in 2014, make payments to insurers with ■■ Outlays of $65 billion and revenues of the same less healthy enrollees; those payments are financed by amount related to payments and collections for risk adjustment and reinsurance. 17. The small-group insurance market is for health insurance generally purchased by or through employers with up to 50 16. Spending for enrollees who receive partial assistance is excluded employees; starting in 2016, states could expand the definition to from these estimates. include employers with up to 100 employees. 10 Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2017 to 2027 September 2017 Table 2 . Net Federal Subsidies Associated With Health Insurance Coverage for People Under Age 65 Billions of Dollars, by Fiscal Year Total, 2018- 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2027 Work-Related Coverage Tax exclusion for employment-based coveragea,b 279 297 314 329 345 365 385 407 428 451 475 3,796 Income tax deduction for self-employed health insurancec 7 7 8 8 8 9 9 10 10 11 11 91 Small-employer tax creditsb 1 ____ ____ ____ ____ ____ ____ ____ ____ 1 1 1 1 1 1 1 1 ____ 1 ____ 1 ______ ____ 10 Subtotal 287 306 323 338 354 374 395 417 439 463 487 3,897 Medicaid and CHIPd Made eligible for Medicaid by the ACA 72 76 79 82 88 95 104 111 122 134 143 1,036 Otherwise eligible for Medicaid 209 225 241 256 271 285 298 314 327 341 358 2,917 CHIP 16 13 6 6 6 6 6 6 ____ ____ ____ ____ ____ ____ ____ ____ 6 ____ 6 ____ 6 64 ____ ______ Subtotal 296 315 326 344 365 386 408 431 455 480 508 4,017 Nongroup Coverage and the Basic Health Program Premium tax credit outlays 27 41 47 49 51 53 54 57 58 60 62 531 Premium tax credit revenue reductions 6 __ 6 __ 6 __ 7 __ 7 __ 7 __ 8 __ 8 __ 8 __ 8 __ 9 __ 75 ___ Subtotal, premium tax credits 34 47 53 55 58 60 62 64 66 68 71 605 Cost-sharing outlays 7 9 9 10 10 10 10 10 10 11 11 99 Outlays for the Basic Health Program 5 5 6 6 6 7 7 7 8 8 9 69 Collections for risk adjustment and reinsurance -9 -5 -5 -6 -6 -6 -7 -7 -7 -8 -8 -65 Payments for risk adjustment and reinsurance 9 5 5 5 6 6 7 7 7 8 8 65 Marketplace grants to states * ___ * ___ 0 ___ 0 ___ 0 ___ 0 ___ 0 ___ 0 ___ 0 ___ 0 ___ 0 ___ * ____ Subtotal 45 62 68 71 74 77 78 82 85 86 90 773 e Medicare 80 81 84 89 94 98 103 108 112 119 124 1,011 Continued collecting funds from insurers with healthier enrollees period. That amount is about one-eighth of total pro- in the case of risk adjustment and by an assessment on jected net spending for the Medicare program. a broad range of insurers in the case of reinsurance. The payments under the risk-adjustment and reinsurance Taxes and Penalties programs are recorded in the budget as mandatory Taxes and penalties related to health insurance cover- outlays, and the collections are recorded as revenues. age are expected to reduce the total amount of federal In CBO’s projections for the 2018–2027 period, risk- subsidies for such coverage by $3 billion in 2017. adjustment and reinsurance payments and collections Under current law, those taxes and penalties would total each total about $65 billion; almost all of that amount $453 billion over the 2018–2027 period, CBO and JCT is for risk adjustment, as the last claims eligible for estimate. the reinsurance program are from plan year 2016. (Collections and payments ultimately offset each other Excise Tax on High-Premium Insurance Plans. An exactly, but because of differences in the timing of excise tax on certain high-cost employment-based cover- collections and payments, slight discrepancies between age is scheduled to be imposed beginning in 2020. The the two will occur in any given period.) tax was originally supposed to take effect in 2018, but the Consolidated Appropriations Act, 2016 (Public Law Medicare 114-113), delayed its implementation by two years. In Net outlays for Medicare coverage for noninstitutional- CBO and JCT’s current projections, collections of that ized people under age 65 are projected to be $80 billion tax total $29 billion over the 2018–2027 period. in 2017 and to total $1 trillion over the 2018–2027 September 2017 Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2017 to 2027 11 Table 2.Continued Net Federal Subsidies Associated With Health Insurance Coverage for People Under Age 65 Billions of Dollars, by Fiscal Year Total, 2018- 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2027 Taxes and Penalties Related to Coverage Gross collections of excise tax on high-premium insurance plansf 0 0 0 -1 -3 -3 -3 -4 -5 -5 -6 -29 Penalty payments by uninsured people -3 -4 -4 -5 -5 -5 -5 -5 -6 -6 -6 -51 Net receipts from tax on health insurance providersg 0 -13 -14 -14 -15 -16 -17 -18 -19 -20 -21 -166 Gross collections of employer penaltiesf 0 ___ -12 ___ -20 ___ -22 ___ -17 ___ -19 ___ -20 ___ -22 ___ -23 ___ -25 ___ -27 -207 ___ _____ Subtotal -3 -28 -38 -42 -40 -43 -46 -49 -52 -56 -59 -453 Net Subsidies 705 735 763 800 847 892 938 989 1,039 1,093 1,150 9,245 Memorandum: Average Subsidy per Subsidized Marketplace or Basic Health Program Enrollee (Dollars) 5,550 6,370 6,140 6,310 6,680 6,870 7,090 7,530 7,830 8,150 8,610 Collections of Excise Tax on High-Premium Insurance Plans, Including the Associated Effects on Revenues of Changes in Taxable Compensation 0 0 0 -4 -7 -9 -11 -14 -17 -20 -24 -106 Sources: Congressional Budget Office; staff of the Joint Committee on Taxation. Positive numbers indicate an increase in the deficit, and negative numbers indicate a decrease in the deficit. This table excludes outlays made by the federal government in its capacity as an employer. ACA = Affordable Care Act; CHIP = Children’s Health Insurance Program; JCT = Joint Committee on Taxation; * = between zero and $500 million. a. Includes the effect on tax revenues of the exclusion of premiums for people under age 65 with employment-based insurance from federal income and payroll taxes and includes the effects on taxable wages of the excise tax on high-cost plans and employer penalties. JCT made this projection; it differs from JCT’s estimate of the tax expenditure for the exclusion of employer-paid health insurance because effects stemming from the exclusion for people over age 65 are excluded here and because the Federal Insurance Contributions Act tax exclusion for employer-paid health insurance is included here. b. Includes increases in outlays and reductions in revenues. c. JCT made this projection; it does not include effects stemming from the deduction for people over age 65. d. For Medicaid, the outlays reflect only medical services for noninstitutionalized enrollees under age 65 who have full Medicaid benefits. Also, the federal government covers a larger share of costs for Medicaid enrollees whom the ACA made eligible for the program than for people otherwise eligible for Medicaid; the government therefore tracks those groups separately. e. For Medicare, the outlays are for benefits net of offsetting receipts for noninstitutionalized Medicare beneficiaries under age 65. f. Excludes the associated effects on revenues of changes in taxable compensation, which are included in the estimate of the tax exclusion for employment-based insurance. If those effects were included, net revenues stemming from the excise tax would total $106 billion over the 2018–2027 period, and revenues from penalty payments by employers would total $157 billion over that 10-year period. g. Net receipts include effects of the excise tax on individual and corporate tax receipts. The excise tax is expected to cause some employers and estimates that receipts stemming from the imposition workers to shift to health plans with lower premiums of the excise tax will total $106 billion over the coming in order to avoid paying the tax entirely or to reduce decade.18 their tax liability. However, those shifts will generally increase income tax revenues, CBO and JCT estimate, 18. That amount is shown as a memorandum item in Table 2. because affected workers will receive less of their income If workers’ wages were instead held constant, their total compensation would be reduced by the amount of the premium in nontaxable health benefits and more in taxable wages. change. Their employers would have smaller deductions for Including those increases in income tax revenues, JCT compensation costs and hence more taxable income—and the resulting total revenues would be similar. 12 Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2017 to 2027 September 2017 Penalty Payments by Uninsured People. Under the indi- a health insurance marketplace.20 The requirement vidual mandate, most U.S. citizens and noncitizens who generally applies to employers with at least 50 full-time- lawfully reside in the country must either obtain health equivalent employees. In CBO and JCT’s projections, insurance, obtain an exemption, or pay a penalty. The payments of those penalties total $207 billion over the penalty equals the greater of two amounts: a fixed dollar 2018–2027 period. However, the increased costs for amount assessed for each uninsured person in a house- employers that pay the penalties are projected to reduce hold, or 2.5 percent of the difference between the house- other revenues by about $50 billion, because employers hold’s adjusted gross income and its income threshold for would generally shift the costs of the penalties to workers tax filing. The fixed dollar amount per uninsured adult is by lowering taxable wages. Once that shift is taken $695 in 2017; the penalty per child is half as large. Both into account, the net reduction in the deficit would be penalties are subject to a cap, and people who are unin- $157 billion. sured for only part of the year face a smaller penalty. Changes in the Estimates of Insurance Although most legal residents are subject to the individ- Coverage and Subsidies Since March 2016 ual mandate, a number of exemptions apply. For exam- In CBO and JCT’s current projections for 2026, an ple, people who would have to pay more than a certain average of 7 million fewer people obtain nongroup cov- share of their income to acquire health insurance do not erage, and 3 million more people are uninsured, than the face a penalty; that share is 8.16 percent in 2017 and agencies estimated in March 2016. For the 2017–2026 is scheduled to grow over time. People may also obtain period (which is covered by both last year’s projections exemptions for having income below the tax-filing and the current ones), the agencies have decreased their threshold, experiencing certain hardships, and belonging estimate of the net federal subsidies associated with to certain religious groups. CBO and JCT expect that health insurance coverage for people under age 65 from a substantial majority of the roughly 28 million people $8.9 trillion to $8.8 trillion (see Table 3). estimated to be uninsured in 2017 will be exempt. In CBO and JCT’s projections, penalty payments collected Changes in the Estimates of Insurance Coverage from uninsured people amount to $3 billion in 2017 For the 2017–2026 period, CBO has slightly lowered and total $51 billion over the 2018–2027 period. its projection of the total noninstitutionalized popula- tion under age 65, which affects the number of people Tax on Health Insurance Providers. Health insurers are projected to have all types of insurance coverage. Using subject to an excise tax (though legislation eliminated those population projections as a starting point, the it for calendar year 2017). The law specifies the total agencies have lowered their projections of subsidized amount of tax to be assessed, and that total is divided and unsubsidized nongroup coverage and increased among insurers according to their share of total their projections of the number of uninsured people. In applicable premiums charged in the previous year. Some addition, the agencies have increased their projections of health insurers, such as firms operating self-insured plans enrollment in employment-based coverage in the near and certain state government entities and tax-exempt term (but decreased them slightly by 2026) and have providers, are fully or partly exempt from the tax.19 increased their projections of total Medicaid enrollment Under current law, net revenues from the tax would in most years. be $13 billion in 2018 and increase steadily to about $21 billion by 2027, for a total of $166 billion over the Total Population Under Age 65. CBO has lowered its decade, CBO and JCT estimate. projection of the total noninstitutionalized population under age 65 in each year—a change first incorporated Employer Penalties. Some large employers that do in CBO’s January 2017 baseline. In CBO’s current not offer health insurance coverage that meets certain projections, 277 million noninstitutionalized people standards under the ACA will owe a penalty if they have under age 65 are expected to reside in the United States any full-time employees who receive a subsidy through 20. To meet the standards, the cost to employees for self-only coverage 19. A self-insured firm essentially acts as its own insurer and bears must not exceed a specified share of their income (which is most or all of the financial risk of providing coverage to its 9.69 percent in 2017 and is scheduled to grow over time), and the workers. plan must pay at least 60 percent of the cost of covered benefits. September 2017 Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2017 to 2027 13 in 2026, whereas in the March 2016 projections, that occur in the future) and the extent to which the overpre- number was 280 million. The main reason is that dictions were caused by factors that would persist over CBO now projects less immigration than it did in the longer term. CBO and JCT have now concluded March 2016.21 that such persistent factors are probably more signif- icant. One such factor might have been less interest Nongroup Coverage and the Basic Health Program. by consumers in enrolling than the agencies expected; Average monthly enrollment in the nongroup market another might have been less inclination by employers from 2018 to 2026 is currently projected to be 7 million to cease offering coverage to their employees because of to 10 million people lower than it was in March 2016. In new options in the nongroup market. Furthermore, after the current projections, subsidized enrollment through examining new data from the Census Bureau’s Current the marketplaces is lower by 4 million to 5 million peo- Population Survey, CBO and JCT now estimate that ple, unsubsidized enrollment through the marketplaces is more people with annual income that would make them lower by 1 million to 2 million, and enrollment outside eligible for subsidized nongroup insurance will instead the marketplaces is lower by 2 million to 3 million. qualify for and enroll in Medicaid coverage on the basis Enrollment in the Basic Health Program is not notice- of their monthly income. ably different. Now that the marketplaces have been operating for The agencies’ reduction in projected enrollment in four years, the agencies expect further net changes in the nongroup market incorporates administrative data enrollment to be small. Specifically, during the pro- indicating lower enrollment in all three parts of that jection period, they currently project changes in aver- market during the past few years than the agencies had age monthly enrollment in each of the three parts of estimated in March 2016. (Most of those data were the nongroup market to be no larger than 1 million first incorporated in CBO’s January 2017 baseline.) people—changes of about the same size as projected Survey data suggest that one reason for the difference in March 2016 for the 2018–2026 period, but from a is that more employers are offering coverage to their much lower starting point. employees than CBO and JCT had anticipated.22 Also, the agencies expect lower enrollment because of CBO and JCT currently project subsidized enrollment announced reductions in federal advertising, outreach, through the health insurance marketplaces to average the enrollment period, and other enrollment efforts 8 million people per month in 2017 and between and, in 2018, because of higher premiums resulting 9 million and 10 million people in later years.23 In from insurers’ uncertainty about federal funding of CSR March 2016, the agencies estimated that the monthly payments; those factors were not incorporated into the average would be 12 million people in 2017 and between March 2016 projections. 14 million and 16 million people in later years. In the past, CBO and JCT’s projections of nongroup For unsubsidized plans purchased through the market- enrollment turned out to be too high, particularly for places, the agencies now estimate monthly enrollment 2016. The agencies have had difficulty ascertaining the averaging 2 million to 3 million in each year from 2017 extent to which those overpredictions occurred because to 2027. In March 2016, they estimated that in each responses to incentives from the ACA to enroll were of the next 10 years, a monthly average of 3 million to slower than anticipated (with significant gains still to 4 million people would be enrolled. 21. For more information, see Congressional Budget Office, The 2017 Long-Term Budget Outlook (March 2017), Appendix A, 23. Most of that change occurred in CBO’s January 2017 baseline www.cbo.gov/publication/52480. projections, in which the agencies lowered their estimate of 22. The data are from the Medical Expenditure Panel Survey’s subsidized enrollment in 2026 from 14 million people to insurance component. For discussion of the 2014 data, 11 million. In this report, CBO and JCT have further lowered see Jean Abraham, Anne B. Royalty, and Coleman Drake, that estimate to about 10 million people. See Congressional “Employer-Sponsored Insurance Offers: Largely Stable in 2014 Budget Office, “Baseline Projections for Selected Programs: Following ACA Implementation,” Health Affairs, vol. 35, no. 11 Federal Subsidies for Health Insurance (Includes Effects of (November 2016), pp. 2133–2137, http://dx.doi.org/10.1377/ the Affordable Care Act)” (January 2017), www.cbo.gov/ hlthaff.2016.0631. publication/51298. 14 Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2017 to 2027 September 2017 Table 3 . Comparison of Current and Previous Estimates of Health Insurance Coverage and Net Federal Subsidies for People Under Age 65 March 2016 Baseline September 2017 Baseline Difference Change in Insurance Coverage in Calendar Year 2026 (Millions of people)a Total Population 280 277 -3 Employment-Based Coverage 152 151 -1 Medicaid and CHIPb Made eligible for Medicaid by the ACA 15 17 2 Otherwise eligible for Medicaid or CHIP 56 _____ 55 _____ -1 _____ Total 71 72 1 Nongroup Coverage and the Basic Health Program Subsidized nongroup 14 10 -4 Unsubsidized nongroup 11 _____ 8 _____ -3 _____ Total 25 18 -7 c Coverage through the Basic Health Program 1 1 * Medicared 9 9 -1 Other Coveragee 6 6 * Uninsuredf 28 31 3 Effects on the Cumulative Federal Deficit, Fiscal Years 2017 to 2026g (Billions of dollars) Work-Related Coverage Tax exclusion for employment-based coverageh 3,620 3,600 -20 Income tax deduction for self-employed health insurancei 53 87 33 Small-employer tax credits 9 _____ 9 _____ 1 _____ Subtotal 3,683 3,696 14 j Medicaid and CHIP Made eligible for Medicaid by the ACA 969 964 -4 Otherwise eligible for Medicaid or CHIP 2,821 _____ 2,841 _____ 20 _____ Subtotal 3,790 3,806 16 Nongroup Coverage and the Basic Health Program Premium tax credits 672 568 -104 Cost-sharing outlays 130 95 -35 Outlays for the Basic Health Program 63 _____ 65 _____ 2 _____ Subtotal 866 729 -137 Medicarek 979 966 -13 Continued For nongroup coverage outside the marketplaces, the in each year from 2017 to 2026 than they were in current projection is a monthly average of 5 million peo- March 2016. The agencies increased their estimate ple during the 2018–2026 period. In March 2016, the for 2017 by 2 million people to reflect recent data agencies projected that a monthly average of 7 million to from surveys.24 It is unclear why more people were 8 million people would be enrolled in in each of those years. 24. For discussion of the data that CBO and JCT use, see Jared Maeda and Susan Yeh Beyer, “How Does CBO Define Uninsured. CBO and JCT’s projections of the number and Estimate Health Insurance Coverage for People Under Age 65?” CBO Blog (December 20, 2016), www.cbo.gov/ of uninsured people are 2 million to 4 million higher publication/52352. September 2017 Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2017 to 2027 15 Table 3.Continued Comparison of Current and Previous Estimates of Health Insurance Coverage and Net Federal Subsidies for People Under Age 65 March 2016 Baseline September 2017 Baseline Difference g Effects on the Cumulative Federal Deficit, Fiscal Years 2017 to 2026 (Continued) (Billions of dollars) Taxes and Penalties Related to Coverage Gross collections of excise tax on high-premium insurance plansl -18 -24 -5 Penalty payments by uninsured people -38 -48 -10 Net receipts from tax on health insurance providersm -145 -145 ** Gross collections of employer penaltiesl -228 _____ -181 _____ 47 _____ Subtotal -429 -397 32 Net Subsidiesm 8,888 8,800 -88 Sources: Congressional Budget Office; staff of the Joint Committee on Taxation. ACA = Affordable Care Act; CHIP = Children’s Health Insurance Program; JCT = Joint Committee on Taxation; * = between -500,000 and zero; ** = between -$500 million and zero. a. Estimates include noninstitutionalized civilian residents of the 50 states and the District of Columbia who are younger than 65. The components do not sum to the total population because some people report multiple sources of coverage. CBO and JCT estimate that in most years, 10 million to 11 million people (or 4 percent of insured people) have multiple sources of coverage, such as employment-based coverage and Medicaid. b. Includes noninstitutionalized enrollees with full Medicaid benefits. Estimates are adjusted to account for people enrolled in more than one state. c. The Basic Health Program, created under the ACA, allows states to establish a coverage program primarily for people with income between 138 percent and 200 percent of the federal poverty guidelines. To subsidize that coverage, the federal government provides states with funding equal to 95 percent of the subsidies for which those people would otherwise have been eligible through a marketplace. d. Includes noninstitutionalized Medicare enrollees under age 65. Most Medicare-eligible people under age 65 qualify for Medicare because they participate in the Social Security Disability Insurance program. e. Includes people with other kinds of insurance, such as student health plans, coverage provided by the Indian Health Service, and coverage from foreign sources. f. Includes unauthorized immigrants, who are ineligible either for marketplace subsidies or for most Medicaid benefits; people ineligible for Medicaid because they live in a state that has not expanded coverage; people eligible for Medicaid who do not enroll; and people who do not purchase insurance available through an employer, through the marketplaces, or directly from an insurer. g. Positive numbers indicate an increase in the deficit, and negative numbers indicate a decrease in the deficit. h. Includes the effect on tax revenues of the exclusion of premiums for people under age 65 with employment-based insurance from federal income and payroll taxes and includes the effects on taxable wages of the excise tax on high-cost plans and employer penalties. JCT made this projection; it differs from JCT’s estimate of the tax expenditure for the exclusion of employer-paid health insurance because effects stemming from the exclusion for people over age 65 are excluded here and because the Federal Insurance Contributions Act tax exclusion for employer-paid health insurance is included here. i. JCT made this projection; it does not include effects stemming from the deduction for people over age 65. j. For Medicaid, the outlays reflect only medical services for noninstitutionalized enrollees under age 65 who have full Medicaid benefits. Also, the federal government covers a larger share of costs for Medicaid enrollees whom the ACA made eligible for the program than for people otherwise eligible for Medicaid; the government therefore tracks those groups separately. k. For Medicare, the outlays are for benefits net of offsetting receipts for noninstitutionalized Medicare beneficiaries under age 65. l. Excludes the associated effects on revenues of changes in taxable compensation, which are included in the estimate of the tax exclusion for employment-based insurance. m.Includes the effects of the excise tax on individual and corporate tax receipts. Such effects were not included in the March 2016 edition of this report. 16 Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2017 to 2027 September 2017 uninsured than the agencies previously projected. For coverage.25 But the agencies expect that as employers instance, potential enrollees’ valuation of being insured gain more experience with the ACA’s coverage options compared with being uninsured may have been lower, and as their continued availability makes employers and the individual mandate may have had a smaller effect on employees more willing to rely on them, more employers people’s decisions, and plans—such as those with high will decline to offer coverage to their employees. deductibles—offered by employers may have been less attractive. The agencies’ projection for 2026 of enrollment in employment-based coverage is lower than it was in CBO and JCT expect the increase in the number of March 2016 largely because of the lower total estimated uninsured people (compared with the earlier estimate) to population under age 65. be larger in later years, partly because a smaller propor- tion of people who lack an offer of insurance through Medicaid. For most years, CBO has increased the an employer and who are ineligible for Medicaid are March 2016 projections of enrollment in Medicaid projected to enroll in nongroup insurance than previ- of people made eligible by the ACA by 1 million to ously expected. That projected change more than offsets 2 million people. The increase is largely driven by the effects of a smaller population and greater Medicaid higher-than-expected enrollment through 2016—which enrollment (in some years), which would both tend to was the result of a larger share of eligible people’s choos- reduce the number of uninsured people. ing to enroll in the program, CBO estimates. Possible factors increasing that enrollment rate include increased Employment-Based Coverage. For most years, CBO and awareness; less burdensome application processes; and JCT have increased last year’s projections of enrollment responses to penalties, reduced stigma, or changes in in employment-based insurance coverage. For example, social norms related to the individual mandate. the current projections for 2018 and 2019 are about 4 million people higher than the previous ones. The size Partly offsetting those increases in Medicaid enrollment, of that change declines in later years, and for 2026, the CBO has slowed the rate at which states are projected to projection is 1 million people lower than it was last year. expand Medicaid coverage. Previously, the agency esti- mated that by 2026, about 80 percent of the people who The increases in most years reflect updated projections met the new eligibility criteria for Medicaid under the of wage growth, which increase the number of workers ACA would live in states that had expanded Medicaid estimated to have income higher than 400 percent of coverage. Because fewer states have expanded such the FPL. That increased proportion of higher-income coverage by the end of 2017 than anticipated, CBO has workers results in a higher estimated proportion of reduced that share to 70 percent by 2027 in its current workers with offers of employment-based health projections. insurance and thus more people with such coverage. That increase in coverage results in part from a reduction Also partly offsetting the projected increases in Medicaid in the number of employers that are expected to enrollment are the agency’s higher projections of earn- stop offering coverage to their employees—because ings from wages and salaries. (Those higher earnings were those workers’ income would be too high for them to get subsidized marketplace coverage instead. As a 25. For example, the Employee Benefit Research Institute found result, although CBO and JCT still project that some no change in the percentage of people under age 65 with employers would stop offering coverage to their workers employment-based coverage between 2013 and 2014. See because of the availability of other coverage options Paul Fronstin, Sources of Health Insurance Coverage: A Look at Changes Between 2013 and 2014 From the March 2014 and 2015 under the ACA, the agencies now estimate that most of Current Population Survey, Issue Brief 419 (Employee Benefit that change would occur a few years later and to a lesser Research Institute, October 2015), http://tinyurl.com/hdz2bc4. extent than previously anticipated. Recent research has In addition, the Employer Health Benefits Survey reported that found little evidence that there has been a substantial the percentage of firms that offered coverage to at least some of net change so far in the number of employers that offer their employees in 2015 and 2016 was statistically unchanged from 2014. See Gary Claxton and others, Employer Health Benefits: 2016 Annual Survey (Kaiser Family Foundation and Health Research and Educational Trust, September 2016), http:// tinyurl.com/yamaox3a. September 2017 Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2017 to 2027 17 first incorporated into Medicaid projections in CBO’s First, estimates of the net cost of subsidies for coverage January 2017 baseline.) As a result, a smaller share of through the marketplaces, along with estimates of related the population is now projected to have income below spending and revenues, are now $137 billion lower. That 138 percent of the FPL, particularly in the later years net reduction results from the agencies’ lower projections of the projection period. CBO and JCT consequently of subsidized enrollment through the marketplaces, expect a smaller share of the population to be eligible for partly offset by an increase in the estimated per-person Medicaid on the basis of their annual income. cost of that coverage and of coverage in the Basic Health Program. Changes in the Estimates of Subsidies In CBO and JCT’s current projections, the net cost to Second, partly offsetting the reduction in estimated sub- the federal government of subsidizing health insurance sidies is a $47 billion decrease in estimated collections of coverage is $88 billion (or about 1 percent) lower over penalty payments from employers that do not offer cover- the 2017–2026 period than it was in the agencies’ March age meeting the ACA’s standards. The reason is that more 2016 projections. That net decrease results mainly from employers are now projected to offer health insurance to two changes. their employees in most years from 2017 to 2026. About This Document Each year, the Congressional Budget Office issues a series of publications describing its projections of the federal budget. This report provides background information that helps explain some of the projections in the most recent of those publications and also provides updated estimates. In keeping with CBO’s mandate to provide objective, impartial analysis, this report makes no recommendations. Susan Yeh Beyer prepared the report with contributions from Jessica Banthin and Alexandra Minicozzi. Kate Fritzsche, Sean Lyons, Sarah Masi, Eamon Molloy, Romain Parsad, Allison Percy, Ezra Porter, Lisa Ramirez-Branum, Robert Stewart, and the staff of the Joint Committee on Taxation contributed to the analysis. Chad Chirico, Theresa Gullo, Holly Harvey, and David Weaver provided guidance and helpful comments. Mark Hadley, Jeffrey Kling, and Robert Sunshine reviewed the report; Benjamin Plotinsky edited it; and Jorge Salazar prepared it for publication. The report is available on the agency’s website (www.cbo.gov/publication/53091). Keith Hall Director September 2017