PPACA Could Have Positive Impact on Social Security Funding

The trustees said the long-range Old Age, Survivors, and Disability Insurance (OASDI) actuarial deficit of 1.92% of taxable payroll for this year’s report is smaller than the deficit of 2% of taxable payroll shown in last year’s report under intermediate assumptions mainly because of this legislation.  

According to the report, the main impact of these two laws on the financial status of the OASDI program is an expected increase in the share of employee compensation that will be paid in wages covered and taxed by the OASDI program. They are together estimated to increase the long-range OASDI actuarial balance by 0.14% of taxable payroll.  

The trustees explained that under these new laws, a combination of federal subsidies for individual insurance through the health benefit exchanges, penalties for being uninsured or not offering coverage, an excise tax on employer-sponsored group health insurance cost, and anticipated competitive premiums from health benefit exchanges are expected to slow the rate of growth in the total cost of employer-sponsored group health insurance. Most of this cost reduction is assumed to result in an increase in the share of employee compensation that will be provided in wages that will be subject to the Social Security payroll tax.   

Most of this change is due to the assumption that an excise tax on employer-sponsored group health insurance, effective in 2018, will lead to slower growth in the total cost of employer-sponsored group health insurance. The trustees expect that such effect of the excise tax on employer-sponsored group health insurance will increase over time because the threshold premium levels above which the tax applies are indexed by all-items Consumer Price Index (CPI), which is assumed to grow slower than the cost of providing health insurance.   

The report said the projections for annual percent changes in employer-sponsored group health insurance cost on a year-by-year basis are consistent with national health estimates from the Office of the Actuary at the Centers for Medicare and Medicaid Services.