CBO Report Shows Affordable Care Act Frees Employees From Working Or Losing Employer-Based Insurance

The Congressional Budget Office has a report out today which is creating a lot of attention, largely due to a misleading but sensational headline in publications such as The Hill regarding decreased employment attributed to the Affordable Care Act.  They predict that there will be two million fewer full time workers by 2017. The question of employers hiring less due to the law is controversial, with evidence so far not showing the reduced hiring some have predicted. The key factor here, as described by The Wall Street Journal, is that “the jobs figures largely represent Americans who will choose not to work rather than those who will lose their jobs or have their workweeks reduced because of the law.”

In other words, this solves a major problem we have faced in the past–people being forced to work beyond when they otherwise desired because they would not be able to obtain insurance if they lost their insurance through their employer. People in their 60’s would have the ability they previously did not have of retiring before they qualified for Medicare at age 65.

Another factor might be that some people will have an economic incentive to work less. One aspect of the Affordable Care Act which should be fixed is the rapid manner in which the subsidies end once the income threshold is reached. People making just over the levels which qualify them for subsidies would be economically better off by working less and bringing their incomes below the threshold. The subsidies should be phased out more gradually to eliminate this problem.

The prediction of  two million fewer workers by 2017 also has to be taken with a grain of salt. There are aspects of the Affordable Care Act which will likely lead to economic improvement but which cannot be scored by the CBO. Some people will leave the job market, but it is also possible that many people, no longer needing insurance through their employer, will take advantage of this to start or work for small businesses. As the Affordable Care Act reduces the burden of providing health care to companies now providing it, these companies might be able to expand more  than expected. Improvements in the health of employees who obtain health care coverage could lead to improved productivity. Decreases in health care costs as a result of the Affordable Care Act should provide additional economic benefits.

As a consequence of the problems with the roll out of the Affordable Care Act, the CBO projects that six million people will sign up in private health plans through the exchanges this year, down from their previous projection of seven million. Most likely the number will increase in subsequent years, and it remains possible that increases in last-minute enrollment might lead to higher figures for this year. Another factor of concern is that some people are not signing up through the exchanges due to false information and a campaign from the right wing advocating that people refuse to sign up.

The report also shows that, while Republicans are demanding an end to the risk corridors in order to agree to an increase in the debt limit, the CBO found that the risk corridors actually wind up saving the government eight billion dollars. It is ironic that this Republican demand (actually more about politics than improving the deficit) would lead to a higher deficit.

We are no longer hearing about trillion dollar deficits. The CBO  projects a deficit of $514 billion in 2014, representing three percent of the Gross Domestic Product. This is near the average level for the past forty years, and a vast improvement from 2009 when deficit was at 10.1 percent of GDP. The CBO predicts a further reduction in 2015 to $478 billion, or 2.6 percent of GDP. They do project increases in the deficit after 2015 primarily due to weaknesses in the economy. It would seem that at present government policy should be to place greater emphasis on stimulating the economy as opposed  to concentrating on short term decreases in the deficit, as more Americans now support.

Update: The Fact Checker at The Washington Post says “No, CBO did not say Obamacare will kill 2 million job.” He awarded three Pinocchios to those, such as many media organizations which reported on the CBO report incorrectly, intentionally make this claim.

Update II: The CBO Report On The Success Of The Affordable Care Act

Update III: CBO Director States Affordable Care Act Will Reduce Unemployment; Paul Ryan Corrects Republican Misinformation