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Congressional Budget Office Releases Estimate on Impact of the American Health Care Act of 2017

 

Email Alert

May 26, 2017

By Michael Flood*

The Congressional Budget Office (CBO) estimated the effects of the American Health Care Act of 2017 (AHCA) (H.R. 1628) in a report released May 24, 2017. The AHCA is a Republican-backed bill intending to replace the Affordable Care Act (ACA). The CBO predicts that enacting the AHCA would result in 23 million more people without health insurance coverage in 2026 than would exist under current law and would reduce the cumulative deficit by $119 billion from 2017-2026.

The House passed the AHCA after the original version of the bill failed to proceed to a floor vote. The new version passed the House as a result of a compromise negotiated between Representatives Tom MacArthur (R-NJ), the former co-chairman of the moderate Republican Tuesday Group, and Mark Meadows (R-NC), the leader of the conservative House Freedom Caucus. Known as the MacArthur Amendment, the compromise would permit states to apply for waivers that, according to CBO, would “allow states to modify the requirements governing essential health benefits (EHBs)” and “allow insurers to set premiums on the basis of an individual’s health status if the person had not demonstrated continuous coverage.” An additional waiver included in the MacArthur Amendment would allow states to use higher age rating ratios than permitted under the ACA.

Coverage

The CBO estimates the projected impact of the AHCA would increase the number of uninsured individuals by 14 million in 2018 and result in 23 million more uninsured individuals relative to current law by 2026. The CBO estimates that enacting the AHCA would lead to 51 million people under the age of 65 lacking health insurance coverage by 2026.

Effect on Premiums

The CBO also analyzed premiums and market stability, predicting that, compared to current law, premiums in the nongroup market would rise before 2020, but that after 2020, premium levels would depend on whether states sought and received the waivers created under the MacArthur Amendment. Further, CBO predicts that there may be market instability in some states, comprising approximately one-sixth of the population, that seek waivers to modify EHB requirements and allow rating based on health status for individuals who fail to maintain continuous coverage. The CBO makes the following predictions regarding premiums:

  • Premiums would be about 4% lower in 2026 in states that do not request waivers than under current law, mostly “because a younger and healthier population would be purchasing the insurance.” Approximately one-half of the population lives in these states.
  • Premiums would be approximately 20% lower in 2026 in states that make moderate changes to market regulations, primarily because of the reduction in the scope of required essential health benefits. Approximately one-third of the population lives in these states.
  • CBO could not estimate how much lower premiums would be in states that obtain waivers relating to the scope of EHBs and health status rating. CBO estimates approximately one-sixth of the population lives in these states and that “less healthy people would face extremely high premiums[,]” making insurance purchases financially difficult. This would result in lower premiums for those who are healthy because of “the difficulty less healthy people would face purchasing insurance.”

Savings

The CBO expects that the cumulative federal deficit would decrease by $119 billion between 2017 and 2026 if the AHCA is enacted. CBO calculates a direct spending reduction of $1,111 billion and a revenue reduction of $992 billion. The reduction in direct spending would be largely due to a predicted $834 billion reduction in Medicaid spending, as the legislation would terminate enhanced federal matching for the ACA’s expansion population and create a per capita funding mechanism for the federal Medicaid share. The reduction in revenue would be largely due to the repeal of the tax provisions included in the ACA.

*We would like to thank Michael T. Flood (Polsinelli PC, St. Louis, MO) and Theresa E. Thompson (Epstein Becker & Green PC, Washington, DC) for respectively authoring and reviewing this email alert.

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