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Lower premiums (yes, really) drive down Obamacare’s expected costs, CBO says

The health-care law's expansion of insurance coverage will cost $104 billion less than projected over the next decade, according to revised estimates from nonpartisan budget analysts Monday. Obamacare's lower-than-expected costs will come largely because premiums will be cheaper than previously thought.

Obamacare's coverage provisions in 2014 are expected to cost $5 billion less than the $41 billion the Congressional Budget Office and Joint Committee on Taxation projected earlier in the year. The CBO now expects the federal government to spend about $164 billion less in the next decade on subsidies in Obamacare health insurance marketplaces. The CBO's expected costs of the Affordable Care Act's coverage provisions have declined since it was signed four years ago, as you can see in the below chart.

The CBO report points out that it previously thought Obamacare's exchange plans would look more like employer-based coverage, but that hasn't turned out to be the case so far — hence, the cheaper premiums. "The plans being offered through the exchanges this year appear to have, in general, lower payment rates for providers, narrower networks of providers, and tighter management of their subscribers’ use of health care than employment-based plans," CBO wrote.

Can that last, though? There's already some pushback on how narrow the 2014 health plans have been, so the networks — and, by extension — premiums will look different 10 years from now. The CBO itself said it expects exchange plans will start to look more like employer plans when exchange enrollment ticks up in future years.

Premiums that came in lower than the CBO expected played a "crucial factor" in revising down expected subsidy costs, the CBO said. The average expected subsidy in 2014 is about $300 (or 6 percent) cheaper than the CBO's February projections. The 2024 projected subsidy is $1,200 (or 14 percent) less than the earlier projection.

The CBO is also expecting a small increase in 2015 premiums. The premium for the benchmark silver plan, which is used to determine subsidies, is expected to rise from $3,800 in 2014 to just $3,900 in 2015. However, premium increases are expected to grow larger in later years, but the CBO said expected 2016 premiums are still 15 percent below its projection from more than four years ago.

Notably, the CBO didn't update its expectation that 6 million will enroll through Obamacare exchanges in 2014. Though the White House announced 7.5 million have signed up through exchanges, the CBO points out that it counts official enrollments differently. The budget analyst counts 6 million as an average of everyone who's had coverage during the year — some may just have a few months of exchange coverage, and others may still sign up in the next few months — so the official enrollment number won't be known until the end of 2014, CBO said.

Meanwhile, the CBO said it expects the federal government will take in $61 billion less than previously projected from other health care law provisions. That includes the unpopular individual mandate, as well as the twice-delayed employer mandate and the tax on high-cost health plans starting in 2018.

The CBO, which four years ago projected that Obamacare would cut the deficit, didn't provide a new detailed accounting of the entire law's expected costs and savings. Its most recent look at the law's total budget impact came in July 2012, when the CBO said it still believed the ACA will reduce the deficit.

Correction: A previous version said the CBO expected the government would collect about $104 billion less than previously projected from health-law provisions over the next decade. It's actually $61 billion.