CBO assesses impact of defunding exchanges

Legislation to repeal mandatory funding in the healthcare reform law for states to create health insurance exchanges would reduce the federal budget deficit by about $14.4 billion over 10 years and also delay the start of those exchanges, according to a new report (PDF) from the Congressional Budget Office.

Earlier this month, the House Energy and Commerce Committee passed five bills designed to weaken or defund the Patient Protection and Affordable Care Act, including legislation that would revoke the law's mandatory funding for states to set up insurance exchanges. The committee also requested a CBO cost estimate.

The CBO's findings showed that federal outlays for state grants would be reduced by $1.9 billion, the entire amount that the CBO assumes would be spent on the grants between 2012 and 2015. Under the law, the HHS Secretary has the discretion to decide the amounts awarded to states for the exchanges until Jan. 1, 2015, when that authority expires. The estimate also highlighted some difficulties for those states that choose to establish exchanges without federal funding.

“We assume that such challenges for states and the federal government would temporarily limit the desirability of exchanges as an alternative to other sources of coverage, reduce the capacity of some exchanges to process enrollment, and ultimately lower enrollment by an estimated 5% to 10% below the levels expected under current law between 2014 and 2016,” the report noted.