CBO: Lower premiums drive down expected costs for health-care law

WASHINGTON - The health-care law's expansion of insurance coverage will cost $104 billion less than projected over the next decade, according to revised estimates from nonpartisan budget analysts Monday. The lower-than-expected costs will come largely because premiums will be cheaper than previously thought.

The Affordable Care Act's coverage provisions in 2014 are expected to cost $5 billion less than the $41 billion the Congressional Budget Office and Joint Committee on Taxation projected earlier in the year. The CBO now expects the federal government to spend about $164 billion less in the next decade on subsidies in health insurance marketplaces. The CBO's expected costs for the Affordable Care Act's coverage provisions have declined since it was signed four years ago.

The CBO report points out that it previously thought the exchange plans would look more like employer-based coverage, but that has not turned out to be the case - hence, the cheaper premiums. "The plans being offered through the exchanges this year appear to have, in general, lower payment rates for providers, narrower networks of providers, and tighter management of their subscribers' use of health care than employment-based plans," the CBO wrote.

Already, there is some pushback on how narrow the 2014 health plans have been, so the networks and - by extension - premiums will look different 10 years from now. The CBO said it expects exchange plans will start to look more like employer plans when exchange enrollment ticks up in future years.

Premiums that came in lower than the CBO expected were a "crucial factor" in revising down expected subsidy costs, the CBO said. The average expected subsidy in 2014 is about $300 (or 6 percent) cheaper than the CBO's February projections. The 2024 projected subsidy is $1,200 (or 14 percent) less than projected.

The CBO is also expecting a small increase in 2015 premiums. The premium for the benchmark silver plan, which is used to determine subsidies, is expected to rise from $3,800 in 2014 to just $3,900 in 2015. Premium increases are expected to grow larger in later years, but the CBO said expected 2016 premiums are still 15 percent below its projection from more than four years ago.

Meanwhile, the CBO said it expects that the federal government will take in $61 billion less than previously projected from other law provisions. That includes the unpopular individual mandate, as well as the twice-delayed employer mandate and the tax on high-cost health plans starting in 2018.