May 12, 2011
This document responds to questions that the Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation (JCT) have received about how federal subsidies for health insurance will increase over time in the insurance exchanges established under the Patient Protection and Affordable Care Act (or PPACA, Public Law 111-148) and the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152). In particular, CBO and JCT have been asked how the growth of federal subsidies for premiums will compare with the increase in the consumer price index (CPI) in the latter portion of the 2012 to 2021 period. The document describes how CBO approached its baseline projections of federal subsidies and reflects CBO and JCT's interpretation of the relevant statutes; ultimately, the Administration will be responsible for interpreting and implementing the legislation.
This discussion addresses subsidies for insurance premiums only and does not cover subsidies for cost sharing. Under current law, certain individuals with lower income will also be entitled to subsidies to reduce the amount they will be required to pay for cost sharing for medical services. Those subsidies for cost sharing will increase over time roughly in line with the growth of costs for medical care and the growth in the number of people receiving those subsidies. This document does not address that provision because it is not directly related to how federal subsidies for premiums will grow over time.