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The good news from the CBO's Obamacare report

The study suggests that the Affordable Care Act could succeed in stabilizing insurance premiums.

By Money Staff Feb 5, 2014 1:43PM

This post comes from Jonnelle Marte at partner site MarketWatch.

MarketWatch on MSN MoneyRepublican lawmakers pounced on new projections from the Congressional Budget Office estimating that Obamacare may cost the U.S. economy 2 million full-time jobs, but health pros say the findings also suggest a silver lining for consumers -- the potential for lower insurance premiums.

The CBO and the Joint Committee on Taxation said it is now looking like premiums for insurance plans sold on the new public exchanges will be about 15 percent lower than they initially expected, based on a look at early enrollment data.

Medical doctor © John Arborgast, Photodisc Red, Getty ImagesThe new estimates also show that insurance companies may collect more than enough in premiums this year to cover their expected medical costs -- reducing the need for future rate hikes. (See: The Budget and Economic Outlook: 2014-2024, a .pdf file.)

"If the CBO is right than I would expect some insurers would either lower premiums—or raise their premiums less than expected," says Larry Levitt, senior vice president at the Kaiser Family Foundation.

Industry pros are focusing on the so-called "risk corridor" program, through which the government will collect payments from insurance companies that receive substantially more in premiums than they need to pay for medical bills.  Through the program, which expires in 2016, the government will redistribute those funds to the insurance companies facing claims that greatly exceed what they are getting from premiums.

The new projections released Tuesday show the CBO now expects that the government will collect $16 billion from insurers who are running a profit but that it will only have to pay out $8 billion of that to the insurance companies that are essentially running at a loss, creating a net $8 billion in savings for the government. Previously the CBO projected that the program would break even.

If things play out as the CBO expects, it would mean that insurance companies are generally charging enough in premiums, and won't have to raise rates in the future. "So it’s not only good news for 2014 but it seems to be a good sign for other years as well," says Levitt.

But some health industry pros point out that the projections may turn out to be rosier than reality. Insurance companies need a good amount of healthy people buying insurance so that their premiums can help offset the health costs incurred by sicker customers, but issuers won’t know if they achieved that healthy mix until later.

Some insurance companies are already worried about whether they will be profitable based on the customers they’ve seen signing up so far, says Robert Laszewski, president of Health Policy and Strategy Associates LLC, a health insurer consultant. And even though the CBO lowered its estimate for 2014 premiums, many consumers are finding that premiums on the insurance exchanges are higher than what they paid previously, he adds.

The CBO report also notes that the premium information available as of early December is not enough to change its estimates for enrollment or premiums for future years. "It’s just too early to really know for sure," says Laszewski. "We don’t know how many people will sign up or how healthy they will be."

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Feb 5, 2014 4:07PM

Odd......the first part of this article sound good for Obamacare, but the second half seems to state the opposite ?

The last paragraph kind of discredits the whole article.

Feb 5, 2014 5:01PM


Nothing but propaganda bulls**t

Feb 5, 2014 7:54PM

Obamacare has created yet another group of people sucking off the government's teat. Incentives for working have been dramatically reduced under this administration, and Obamacare is making that worse.

People who walk the fine line in order to maximize their welfare benefits have new competition when it comes to government handouts for health insurance. Many people will tailor their earnings in order to keep all that "free" money coming in.

In the end, we will become a welfare state, with the majority of Americans dependent on the government for their existence. And that will complete the "fundamental transformation of America" Obama promised us.

Feb 5, 2014 2:24PM
"The good news from the CBO's Obamacare report
The study suggests that the Affordable Care Act could succeed in stabilizing insurance premiums."

Well get Ready for bought and paid for posters to state otherwise. The same posters that refuse to comment nor worry when costs nearly doubled from 2002-2008, Long before Obama or the ACA.

For a family of four, total annual cost coverage from an employer went from $9,000 in 2002 to almost double that by 2008. Yet According to some posters, all life and Reality started the day Obama became President. They cannot acknowledge anything before that. That wouldn't fit their political agenda.

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