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CCH® BENEFITS — 11/10/09

CBO Projects 6 Million More Will Be Covered By Employer Plans Under Health Reform Proposal

from Spencer’s Benefits Reports: About 6 million additional individuals would obtain coverage through an employer health care plan under H.R. 3962, the Affordable Health Care for America Act, according to a preliminary analysis by the Congressional Budget Office (CBO) and the Joint Committee on Taxation. H.R. 3962 is expected to be considered by the full House this week.

In general, enacting H.R. 3962 would result in a net reduction in federal budget deficits of $104 billion over the 2010–19 period. In the subsequent decade, the collective effect of its provisions probably would produce slight reductions in federal budget deficits, according to the CBO analysis. The estimate includes a projected net cost of $894 billion over ten years for the proposed expansions in insurance coverage.

The CBO analysis also projects “roughly one-fifth of the people purchasing coverage through the [insurance] exchanges would enroll in the public plan, meaning that total enrollment in that [public] plan would be about 6 million.”

As noted by the CBO in earlier analyses of health reform proposals, the “estimates are all subject to substantial uncertainty.”

Effects On Employers

Additional projections in the report that would affect employer-provided plans include these:

• Coverage provisions in H.R. 3962 that would increase federal deficits include a tax credit for certain small employers that offer health insurance. Those costs would be partly offset by a net increase in receipts, from two sources: penalty payments by uninsured individuals, which would yield receipts of about $33 billion, and penalty payments by employers under the play-or-pay requirement, which would total about $135 billion.
• Under H.R. 3962, certain small employers could allow all of their workers to choose among the plans available in the new health insurance exchanges, but those enrollees would not be eligible to receive subsidies via the exchanges (and thus are identified as enrollees in employment-based coverage rather than as exchange enrollees). The CBO expects that approximately 9 million people would obtain coverage in that way by 2019.
• Under the Community Living Assistance Services and Supports (CLASS) provisions, which would establish a voluntary federal program for long term care insurance, active workers could purchase coverage, usually through their employer. Premiums would be set to cover the full cost of the program as measured on an actuarial basis. However, according to the CBO, the program’s cash flows would initially show net receipts in early years, followed by net outlays in later years. In particular, “the program would pay out far less in benefits than it would receive in premiums over the 10-year budget window, reducing deficits by about $72 billion over that period,” said the CBO analysis.
• The analysis does not reflect the impact of the provision that would restrict the ability of employers to reduce health insurance benefits to retirees.

The analysis is available at http://www.cbo.gov/.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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