CBO and JCT's Estimates of the Effects of the Affordable Care Act on the Number of People Obtaining Employment-Based Health Insurance

March 15, 2012

NOTE: On March 23, 2012, minor revisions were made on pages 2 and 11 (see footnote 21).

CBO and the staff of the Joint Committee on Taxation (JCT) continue to expect that the Affordable Care Act (ACA)—the health care legislation enacted in March 2010—will lead to a small reduction in the number of people receiving employment-based health insurance. Some observers have expressed surprise that CBO and JCT have not expected a much larger reduction given the expanded eligibility for Medicaid and the subsidies for insurance coverage purchased through health insurance "exchanges" that will result from the ACA. CBO and JCT's estimates take account of those factors, but they also recognize that the legislation leaves in place some financial incentives and also creates new financial incentives for firms to offer and for many people to obtain health insurance coverage through their employers.

Despite the care and effort that CBO and JCT have devoted to modeling the health insurance system and the provisions of the ACA, there is clearly a tremendous amount of uncertainty about how employers and employees will respond to the set of opportunities and incentives under that legislation. In response to questions from Members of Congress, CBO and JCT have prepared an analysis showing how the effects of the ACA on health insurance coverage would differ under alternative assumptions about the behavior of employers.

CBO and JCT's Key Findings

  • CBO and JCT continue to expect that the ACA will lead to a small reduction in employment-based health insurance. That projection arises from the agencies' modeling of the many changes in opportunities and incentives facing employers and employees under the ACA, and it is consistent with the findings of other analysts who have carefully modeled the nation’s health insurance system.
  • Significant changes in some of the key assumptions underlying the estimates lead to somewhat higher or lower projections of the change in employment-based health insurance and the budgetary impact of the ACA. However, differences in the projected change in employment-based health insurance tend to have limited effects on the projected budgetary impact of the law because changes in the availability and take-up of such insurance affect the federal budget through several channels that are partly offsetting. Indeed, one scenario examined here shows that larger reductions in employment-based health insurance than expected by CBO and JCT might lower rather than raise the cost of the insurance coverage provisions of the ACA.
  • In CBO and JCT's judgment, a sharp decline in employment-based health insurance as a result of the ACA is unlikely and, if it occurred, would not dramatically increase the cost of the ACA.