Improving Affordability of Insurance by Eliminating the Firewall.

Issue: The Affordable Care Act (ACA) includes a “firewall” provision that prohibits workers with an affordable offer of employer-sponsored insurance (ESI) from receiving premium tax credits in the individual insurance marketplace. Eliminating the firewall could help certain low-income workers find more affordable coverage options in the marketplace. Goals: Simulate the effects of removing the firewall on health insurance coverage, household premiums, and overall costs to federal and state governments. Methods: We use the Urban Institute’s Health Insurance Policy Simulation Model to estimate the effects of firewall removal. Key Findings and Conclusion: Eliminating the firewall leads to 1.8 million people (1.2%) shifting out of ESI, with many finding more affordable coverage in the marketplace (and a few in Medicaid) and a reduction of 1.4 million uninsured people. However, the tax subsidies for ESI are large enough that most of those with ESI benefit by staying enrolled in that coverage. Removing the firewall would save households $4.4 billion in premiums and other health care spending. The federal government would increase spending by $17.8 billion, primarily for marketplace premium tax credits. This would represent an increase of 18 percent in federal spending on premium tax credits. [ABSTRACT FROM AUTHOR]