The top conclusion from a new report by the nonpartisan Congressional Budget Office is that the federal deficit will fall to just $514 billion in 2014 -- down from $1.4 trillion five years ago.
But what has attracted the most attention in the report are its projections on President Barack Obama’s health-care law. Republicans have seized on them to claim that the law will hurt employment. “Obamacare to print even more pink slips,” said Senate Minority Leader Mitch McConnell’s office.
The White House has fired back: “Claims that the Affordable Care Act hurts jobs are simply belied by the facts in the CBO report.”
So what does the CBO report say about the health-care law? Here are four major takeaways:
1. The law will reduce the labor supply by 2 million full-time equivalent workers in 2017 and 2.5 million in 2024
“CBO estimates that the ACA will reduce the total number of hours worked, on net, by about 1.5 percent to 2.0 percent during the period from 2017 to 2024, almost entirely because workers will choose to supply less labor—given the new taxes and other incentives they will face and the financial benefits some will receive… The reduction in CBO’s projections of hours worked represents a decline in the number of full-time-equivalent workers of about 2.0 million in 2017, rising to about 2.5 million in 2024.” (Page 123)
This, however, is largely about people’s desire to remain in the workforce, not about whether employers think the law is too costly to hire people. For example, under the health-care law, a 62-year-old worker might decide to retire from his job because he can obtain health insurance on the exchanges or expanded Medicaid -- rather than through his employer.
Indeed, the CBO report says that labor demand -- that is, businesses’ desire to hire workers because of the law -- will mostly be unchanged.
“Beginning in 2015, employers of 50 or more full-time equivalent workers that do not offer health insurance(or that offer health insurance that does not meet certain criteria) will generally pay a penalty. That penalty will initially reduce employers’ demand for labor and thereby tend to lower employment. Over time, CBO expects, the penalty will be borne primarily by workers in the form of reduced wages or other compensation, at which point the penalty will have little effect on labor demand but will reduce labor supply and will lower employment slightly through that channel.” (Page 130)
2) In 2014, 1 million fewer folks – from 7 million to 6 million -- will sign up for insurance coverage in the exchanges due to the website problems
“Those changes primarily reflect the significant technical problems that have been encountered in the initial phases of implementing the ACA.” (Page 118)
3) The controversial “risk corridors” that Republicans are attacking reduce the deficit by $8 billion
Many Republicans are opposed to the so-called “risk corridors” in the health-care law – payments to insurance companies in the event that the risk pools end up worse than expected. But the CBO says the risk corridors actually decrease the deficit.
“CBO now projects that, over the 2015–2017 period, risk corridor payments from the federal government to health insurers will total $8 billion and that the corresponding collections from insurers will amount to $16 billion, yielding net savings for the federal government of $8 billion.” (Page 116)
4) Average health-insurance premiums are lower than expected
“CBO and JCT lowered their estimate of average premiums for insurance coverage through exchanges in 2014 by about 15 percent on the basis of a preliminary analysis of plans offered through exchanges. Because the information about premiums and enrollment is still limited, however, CBO and JCT have not adjusted their projections of premiums for years after 2014. (Page 120)