White House economists on Friday said that eliminating the individual mandate penalty and expanding access to short-term and association health plans will generate $450 billion in consumer savings over the next decade.
A report released Friday from the White House's Council of Economic Advisers sought to be a counterweight to charges that the policies are meant to sabotage the Affordable Care Act.
"Unfortunately, most health policy has fixated on increasing enrollment in government finance coverage and on the gross premiums on the exchanges," a senior administration official said on a Friday call with reporters.
The report focuses on the impact of three policies: expanding access to short-term and association health plans and zeroing out the individual mandate's tax penalty.
Cutting the penalty will reduce the deficit by $185 billion thanks to reductions in federal subsidies to ACA exchange customers that would flee the exchanges because they no longer have to buy insurance, the economists said.
"Generally, eliminating taxes and subsidies has larger welfare effects beyond government revenues due to the excess burden of such measures," the report said. "The CEA thus finds that the regulatory reforms will generate benefits that are larger than the reduction in Federal spending."
ACA requirements for qualified health plans have led to higher administrative costs for insurers. Those costs are then passed down to consumers, but those same costs don't apply to short-term and association plans, the economists said.
Short-term and association plans do not have to meet the same benefit requirements as ACA plans, such as a requirement to cover pre-existing conditions and various health benefits like maternity or mental health.
The Council of Economic Advisers estimated that around 5 million people can obtain a cheaper insurance option thanks to the administration's moves. The Congressional Budget Office has projected that 5 million people will go without insurance by 2021 because of the mandate penalty's elimination.
Zeroing out the penalty led to $136 billion in net benefits to consumers and taxpayers from 2019 to 2028, the economists said. Association health plans could spark another $84 billion in savings during that timeframe while short-term plans could lead to $82 billion saved. Reductions in administrative costs to health plans could lead to another $151 billion in savings.
The report concedes that the taxpayers who benefit the most from the reductions are low-to-middle income consumers who were largely the ones that paid the mandate penalty, even though there were exemptions for people with low incomes.
"Because we estimate that some consumers will have to pay somewhat higher premiums, the reforms will impose costs on some middle- and higher-income consumers with incomes above 400% of the federal poverty line," the report said, referencing the cutoff to qualify for income-based subsidies.
But critics say that the policies the report touts could lead to Americans getting plans that don't cover as many benefits as ACA plans, chief among them covering pre-existing conditions.
"Americans purchasing these shoddy, misleading short-term health plans will be one diagnosis away from disaster," House Speaker Nancy Pelosi (D-Calif.) said in a statement in February 2018 on the announcement of the short-term regulation.
Some experts added that the economic benefits aren't the only things for the administration to consider when evaluating their policies.
"The White House is pointing to the economic benefits of deregulating insurance under the ACA. It will also have to live with the consequences: fewer people insured, less comprehensive insurance, and higher premiums for people with pre-existing conditions," tweeted Larry Levitt, senior vice president of the research firm Kaiser Family Foundation.
