What if More People Than Expected Enroll in ObamaCare's Exchanges?


Earlier this year, in the process of reporting a piece on how the new health care law could affect the states, I spoke with James Capretta, a Bush administration budget official whose work focused on health care. During our conversation, he warned that the state-based exchanges might end up far more crowded than the roughly 19 million predicted by the Congressional Budget Office. Today, Capretta and former CBO director Douglas Holtz-Eakin expand on this this warning:  

The population potentially eligible for this new federal entitlement is large. The Census Bureau says there are about 111 million Americans under the age of 65 in households with incomes between 135 percent and 400 percent of the poverty line. 

But the Congressional Budget Office forecasts that only 19 million people will be getting the new federal premium subsidies in 2019. That's because the law stipulates than any person offered qualified insurance coverage by an employer is ineligible for premium assistance offered by the exchanges, and the CBO expects most employers to continue sponsoring insurance plans. This would sharply limit the migration to the heavily subsidized exchanges.

But is that a reasonable assumption? Tennessee Gov. Philip Bredesen recently made the case that it isn't. He argued that Tennessee and other states would be better off dumping large numbers of state employees into the exchanges and ending state-sponsored coverage. 

Moreover, each day seems to bring fresh news of private employers running the numbers to assess their options, the only prudent thing to do given the financial stakes involved. They are, no doubt, figuring out that tens of millions of U.S. workers might be better off getting premium assistance in the exchanges than with the less-generous federal tax break, which accompanies employer-paid insurance premiums.

For a family of four with $60,000 in cash wages in 2016, according to Stephanie Rennane and C. Eugene Steuerle of the Urban Institute, the new entitlement in the exchanges would be worth $3,500 more than the tax break for job-based coverage. Over time, both employers and the labor market are certain to adjust to take advantage of the new subsidy structure.

So what's a more reasonable guess at how many people will enroll in the exchanges? Capretta and Holtz-Eakin say it's a "safe assumption" that 35 million Americans "could end up there over time." That means more far people getting their insurance through a government-run mechanism (the exchange), which will ultimately put far more power over care and coverage in the hands of the government officials who run the exchanges. 

It also means far more individuals who get taxpayer-funded subsidies. And that means a far greater total cost than officially estimated:

The CBO projects that the premium-assistance program will cost about $450 billion from 2014 to 2019, but that cost would rise to $1.4 trillion if workers and their family members with incomes between 133 percent and 250 percent of the poverty line were to migrate out of their current job-based plans and into the exchanges on Day One. That's nearly $1 trillion more than the amount advertised by the law's supporters.

As with the CBO's official numbers, these figures are projections and thus subject to various limitations and uncertainties. But that's part of the point: There's a huge amount of uncertainty surrounding the law and the projections about how it will work. And built into that uncertainty is quite a bit of risk that things will go wrong—and not a whole lot of upside risk that things will go especially right.