The Hill
June 05, 2013

Hatch probes rising cost of health law's subsidies

Sen. Orrin Hatch (R-Utah) wants to know why the price tag keeps rising for new insurance subsidies under President Obama's healthcare law.

Hatch wrote to Cabinet officials Wednesday seeking more information about the cost of providing tax credits to help people pay for their insurance premiums.

The latest White House budget proposal estimates spending roughly $32 billion in 2014 on tax credits to help cover premiums. That cost has more than doubled over the past few White House budgets.

Hatch suggested that the rising costs of subsidies might stem from concerns that employers will dump their workers into the new marketplaces if their costs rise significantly once the health law is implemented.

He requested a breakdown of the factors that contributed to the rising cost estimates.

The healthcare law sets up new marketplaces for insurance and, beginning next year, offers tax credits to people who use the new marketplaces. The size of the credit depends on household income.

In 2012, the White House estimated that the first year of subsidies would cost $15.5 billion. The next year, it rose to $21.5 billion. This year, the estimated cost was roughly $32 billion.

The second price jump is at least partially a result of the Supreme Court's healthcare ruling last year.

The court allowed states to opt out of the healthcare law's Medicaid expansion. So millions of people who otherwise would have gotten Medicaid will instead end up buying private insurance and receiving tax credits.

As more people receive subsidies, the total cost of the subsidies goes up. And the additional subsidies will also be some of the biggest the law offers, because the new enrollees will be especially poor.

But, as Hatch noted, the estimated cost started rising before the Supreme Court's ruling — it jumped by 38 percent between the 2012 and 2013 estimates.

"Since these projected expenditure increases occurred before and after the Supreme Court decision that made it voluntary for states to expand Medicaid, it appears that enrollment of low-income individuals in the exchanges is not the only reason for the ballooning costs of subsidized coverage," Hatch wrote to administration officials.

View full article here.