CBO: Obamacare Could Make 20 Million People Lose Employer Based Insurance

Published March 15, 2012

The Congressional Budget Office and the staff of the Joint Committee on Taxation have prepared a new analysis of the ramifications of President Obama’s health care law on employer-based insurance. Outlining multiple scenarios for the ramifications of the act, based on the level of employer buy-in to shifting their employees to the exchanges, the CBO and JCT find that the number of Americans losing employer-based coverage could be dramatically larger than previously estimated.

Their analysis finds that approximately 3-5 million people will lose their employer based insurance under what they view as the likeliest outcome of the law, noting that “because of the ACA, about 3 million to 5 million fewer people, on net, will obtain coverage through their employer each year from 2019 through 2022 than would have been the case under prior law.”

Up to 20 million people could lose this employer-based insurance in 2019 under a more drastic scenario:

“With those assumptions about employers’ behavior, CBO and JCT estimate that the ACA would reduce employment-based insurance coverage in 2019 by 20 million people, compared with 5 million in the baseline projections. Enrollment in the exchanges is estimated to be 31 million in that year, 9 million more than in the baseline, and enrollment in Medicaid and CHIP is estimated to rise by 18 million, 2 million more than in the baseline. The number of uninsured is estimated to be 29 million less than the number under prior law, leaving 28 million people uninsured in 2019. Those estimated differences in insurance coverage relative to the baseline are similar in direction to those in the first scenario but generally of greater magnitude. However, the estimated net budgetary effect is a decrease in the cost of the ACA, rather than an increase, as in the first scenario.”

“In this third scenario, CBO and JCT estimate that the coverage provisions of the ACA would have a net cost to the federal government of $1,239 billion over the 11-year period from 2012 to 2022, a savings of $13 billion relative to the baseline projections. With substantially more people receiving insurance through the exchanges, Medicaid, and CHIP than in the baseline, exchange subsidies would be $310 billion higher, and federal Medicaid and CHIP outlays $65 billion higher, than in the baseline. However, in this scenario, those extra costs would be almost entirely offset by higher tax revenues stemming from an increase in taxable wages and salaries that would occur as firms reduced their nontaxed payments for employment-based health insurance. That increase in revenues would amount to $351 billion. In addition, revenues from penalties collected from uninsured individuals and especially employers who do not provide minimum health benefits would be higher in this scenario than in the baseline.”

In response to the CBO/JCT report, House Budget Chairman Paul Ryan (R-WI) issued the following statement:

“President Obama’s string of empty promises is quickly becoming a disappointing trail of broken promises. He promised Americans that his overhaul of the health care sector would not jeopardize the health coverage of those who liked what they had.  As nonpartisan analysts made clear today, millions of Americans will soon learn the hard way that Washington’s overreach into their health care decisions will result in sharp disruptions to their coverage and their care. The President’s disastrous health care law continues to unravel. To advance bipartisan, patient-centered solutions, the President’s partisan roadblock must be repealed.”

Read the full CBO analysis here.