CBO: Health reform hits coverage

CBO: Health reform hits coverage
By: J. Lester Feder
March 15, 2012 11:54 AM EDT - POLITICO

A new report from the Congressional Budget Office hands critics of the health reform law a great new talking point: Under a worst-case scenario, the law could lead to 20 million people losing their employer-sponsored insurance in 2019.

The agency doesn’t think that’s likely, however. The new report, released Thursday, said the agency expects 3 million to 5 million fewer people to have employer coverage each year because of the health reform law. That’s close to the agency’s original estimate, which predicted 3 million people could lose their workplace coverage.

But the new report also lays out the worst-case scenarios and the best-case scenarios, which led to the 20 million estimate. In the best-case scenario, CBO says an increase of 3 million workers with employer insurance is possible.

Even the worst-case scenario wouldn’t be a fiscal calamity for the federal government, which would have to subsidize coverage for many of these workers through the new health insurance exchanges or cover them through Medicaid. In fact, CBO said it could actually reduce the cost of the health reform law because their coverage would be more than offset by employer penalties and increased tax revenue.

But any loss of employer-sponsored coverage could be disruptive to the people who lose their insurance, even if they’re able to replace it through another source, like the health insurance exchanges that will be created under the law. And Republicans and other critics of the law are sure to highlight the new estimates as proof that health reform will force people out of health plans they like.

House Budget Committee Chairman Paul Ryan said the report proves President Barack Obama has already broken his promise that health reform wouldn’t endanger the coverage people already have. “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,” Ryan said in a statement. “The president’s disastrous health care law continues to unravel.”

And Sen. Orrin Hatch (R-Utah), the ranking Republican on the Senate Finance Committee, said the 20 million estimate “exposes more of the real costs of the president’s unconstitutional, deeply flawed health spending law. … This law keeps getting worse and worse; it needs to be repealed.”

Those changes would come on top of the losses in coverage that have already happened because of the recession. Another report also released Thursday, by the Center for Studying Health System Change, said the high unemployment rate during the recession reduced the share of people with workplace health insurance by 10 percent — and that employers probably won’t return to their previous levels of coverage even after the economy recovers.

According to the CBO report, a large decline in employer insurance would, paradoxically, actually reduce the law’s price tag by about $13 billion — because the cost of covering these workers under Medicaid and through the exchanges would be partly offset by the penalties employers will pay for not providing coverage. And the rest of the added costs would be more than made up from another source: higher income taxes.

CBO assumes that if employers stop paying health insurance premiums — which economists believe have been depressing wages for years — employees will start getting larger paychecks and sending more to the IRS.

But CBO says it continues to believe that "most employers will continue to have an economic incentive to offer health insurance to their employees," so it does not expect a dramatic change in employer coverage.

This article first appeared on POLITICO Pro at 11:50 a.m. on March 15, 2012.