The Affordable Care Act's lower-than-projected premiums may dampen healthcare spending significantly more than first estimated, perhaps as much as $190 billion over the next 10 years in savings, according to a recent study from the Center for American Progress.
The progressive think tank said that the Congressional Budget Office (CBO) had previously forecast only slightly lower premium prices from competition in the health insurance exchanges.
However, when CBO recalculates its baseline in the spring, it will take into account the actual lower premium rates for plans offered in the health insurance exchanges in 2014.
In March 2012, CBO had projected an average family premium for the second-lowest-cost silver plan of $15,400 in 2016. This is equivalent to an average individual premium of $5,700 in 2016 and $4,700 in 2014, the report said.
The actual average premium for the second-lowest-cost silver plan in 2014 is $3,936, or 16 percent lower than projected, the report said. That 16 percent reduction in premiums will translate into a 21 percent decrease in costs for tax credits, the report said.
That means that the savings to the federal government will be about $190 billion over 10 years, boosting the health law's amount of deficit reduction by 174 percent, "an important early indication that the Affordable Care Act is working even better than expected to lower healthcare spending and federal deficits," said the study authors Topher Spiro, vice president for health policy at the center, and Jonathan Gruber, an economics professor at the Massachusetts Institute of Technology who also advised then Gov. Mitt Romney on the Massachusetts healthcare law.
The authors noted that the McKinsey Center for U.S. Health System Reform also found that new health insurance entrants, making up about 26 percent of all insurers, were increasing competitive pressures by pricing their plans lower than the median premiums in their market. And the Kaiser Family Foundation had found that premiums were lower than CBO's projections in 15 of 18 areas that it analyzed.
The Center for American Progress said that the 16-percent reduction in premium prices also means that more individuals may sign up for coverage because it is more affordable, perhaps an additional 700,000 people over the next 10 years based on CBO's projected decline in the number of uninsured of 25 million by 2023.