Saturday, April 09, 2016

Is the ACA's drag on employer-sponsored insurance less than expected?

There seems to be an impression stalking the land that once upon a time (and for many years thereafter), the Congressional Budget Office forecast that the Affordable Care Act would strongly inhibit Americans' access to employer-sponsored insurance -- and that the forecast has not panned out. That's a misimpression.

In fact, since 2010 CBO has consistently forecast that the ACA would mildly inhibit the growth in access to ESI that would have taken place had the law never been passed. In all its annual ten-year forecasts, single years in which it forecast an actual drop in ESI enrollment form the year are rare -- and in fact, almost all such forecast one-year drops are for 2016..* From 2010 to 2016, moreover the only year in which CBO forecast that total ESI enrollment would be lower ten years ahead than in the present year was...this year. The current forecast has ESI at 155 million for 2016, dropping to 152 million by 2019 and staying at that level through 2026. In 2010, CBO forecast that ESI enrollment would be 159 million in 2019.

Why, then, the impression that CBO has reduced its estimates of ESI inhibition?  In one important, and relatively recent sense, it has. In 2013, CBO  ratcheted up its forecast of a drop in ESI this year, then pushed it up another notch in 2015. That cut was to be in tandem with a jump in enrollment in the ACA marketplace, always forecast for 2016. This was to be the year that the marketplace came of age and several million would presumably be sucked out of the employer-sponsored market -- presumably as employers of lower income workers came to recognize that their employees could do better in the ACA marketplace (which is broadly true for employees with household incomes below 200% of the federal poverty level). Again, every year since 2010, CBO has forecast an absolute drop in ESI this year. That apparently hasn't happened.

Here are select points in CBO forecasts from 2010-2016. The figures in parentheses contrasts forecasts for the year in question either with CBO's estimates of what would have happened were there no ACA or, in the case of marketplace enrollment, with that year's estimate for 2015.

CBO Forecasts for ESI and Marketplace Enrollment (in millions)


Year of report
ESI Forecast
 2016
(absolute & vs. prior law)
Marketplace
Enrollment
forecast for 2016
(absolute &
vs. 2015)
ESI forecast
2019
(absolute & vs. prior law)
ESI forecast
2023
(absolute & vs. prior law)
ESI forecast 10 yrs out
vs. year of report
ESI forecast 10 yrs out
vs. pre-ACA law
2010 (March)
159
(162-3)
21
(+8)
159
(162-3)
     - 

+9
-3
2011
(March)
158
(163-5)
22
(+6)
157
(163-6)
     -
+4
-6
2012 (March)
155
(159-4)
20
(+8 )
156
(161-5)
     -
+4
-3
2013
(May)
155
(161-6)
22
(+9)
159
(166-7)
162
(169-7)
+6
-7
2014 (Feb)
155
(161-6)
22
(+9)
159
(166-7)
162
(169-7)
+5
-7
2015
(Jan)
153
(160-7)
21
(+9)
156
(165-9)
157
(166-9)
-1
-9
2016
(March)
155
  -
12
 -
152
  -
152
  -
-3
-9

In 2012, CBO forecast that as marketplace enrollment jumped from 12 million to 20 million in 2016, ESI enrollment would drop 2 million from its 2015 level, and 4 million from what it would have been if there were no ACA. In 2013, the forecast was that ESI would be at 155 million (dead-on, incidentally), again 2 million below the 2015 level and 6 million below the no-ACA total. Again, marketplace enrollment would jump, from 13 to 22 million.

In April 2014, when the ACA's first year private plan enrollment was perceived to have exceeded expectations, CBO ratcheted up its marketplace enrollment forecast to 24 million for this year, along with a 3 million drop in ESI enrollment compared to 2015. Last year, when marketplace growth was less than expected, CBO dialed back to 21 million marketplace enrollees, but left the forecast drop in ESI in place, envisioning 153 million this year -- 7 million less than their estimate of enrollment were there no ACA.

Those more recent forecasts are the ones that have been seized on as a partial explanation for lower than expected marketplace enrollment. ESI enrollment this year is estimated at 2 million above the level forecast in 2014 and 2015, albeit exactly at the level forecast in 2013 and 2012. Viewed another way, however, the expectations gap is somewhat larger. In 2015, CBO forecast that ESI enrollment would drop 7 million, from its then-current (estimated level of 158 million. By that measure, it's 4 million above forecast.

Marketplace enrollment, meanwhile,stands now at just 12.7 million, compared to CBO forecasts ranging from 21 to 24 million. Moreover, the CBO marketplace forecasts are for average monthly enrollment throughout the year, and attrition will almost surely whittle that figure down, probably to about 11 million. Perhaps it's fair to say that recent CBO projections for ESI account for about 40% of the shortfall.

The fact remains that marketplace enrollment is basically half what CBO expected, and the resilience of employer-sponsored insurance accounts for only part of the expectations gap.  CBO has scaled back its estimate of full marketplace capacity from 25 million to 18 million. The Kaiser Family Foundation has recently implied that de facto full capacity in the marketplace at this point would be about 16.3 million, based on the percentage of subsidy-eligible potential enrollees enrolled in the best-performing state markets. According to Kaiser's estimates, about 70% of subsidy-eligible potential enrollees nationwide are currently enrolled in marketplace plans -- a total likely to drift down toward 60% by year's end.

[Update: As to why various forecasts have shrunk, Ken Kelly on Twitter highlights a key factor: CBO's estimate of the total nonelderly population has shrunk. For 2016, CBO pegged it at 277 million in 2014, 274 million in 2015, and 272 million this year. For 2024, the estimates are 289 million (2014), 286 million (2015), and just 279 million (2016). Hence the  reduction in ESI estimates in out-years. CBO projects that the percentage of adults under 65 covered by ESI will decline from 57% at present to 54% by 2026.  It attributes the expected drop mainly to a relatively small number of employers dropping coverage, continuing a gradual decline that's been going on for decades.]
One other factor in the reduced estimate is recognition that most people who earn too much to qualify for ACA subsidies but need to buy insurance in the individual market have little incentive to obtain their plans in the marketplace. But CBO, unlike some analysts, never grossly overestimated unsubsidized in-marketplace enrollment. it always foresaw about 80% of enrollees being subsidized (this year,82% are). CBO currently forecasts a ten-year peak of 4 million unsubsidized marketplace enrollees, versus 5 million forecast in 2012 and 2013.

-------

* 2011 is the only year in which CBO did not forecast an absolute drop in ESI enrollment from 2015 to 2016.

CBO ACA forecasts
2016
2014 
2013 

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