US CBO estimates 23 mil. fewer people will be insured under revised AHCA

The Congressional Budget Office (CBO) in collaboration with the Joint Committee on Taxation (JCT) have issued their latest estimates for the impact of the latest version of the American Health Care Act of 2017 (AHCA), H.R. 1628 – which was approved by the House in May – on federal spending and the insurance market (see United States: 5 May 2017: US House passes bill to repeal and replace Affordable Care Act). The report forecasts that the legislation, if enacted, would reduce the federal deficit by USD119 billion by 2026. This would result from a USD1,111-billion reduction in direct spending, mainly from Medicaid reforms (USD834 billion decrease in spending), offset by a USD992-billion reduction in revenues between 2017 and 2026.

Impact on health insurance

The CBO and JCT project that 14 million more individuals would be uninsured under the latest version of the AHCA in 2018. This number will increase to 19 million in 2020, rising to 23 million in 2026. In total, 51 million individuals under the age of 65 would be uninsured in 2026. The CBO did note, however, that a few million individuals would probably use tax credits to purchase policies that do not cover major medical risks, and are therefore not considered insured. These include plans with limited insurance benefits (known as mini-med plans), policies that cover only specific diseases, fixed-dollar indemnity plans that pay a certain amount per day for illness or hospitalisation, and single-service plans.

The CBO and JCT note that although "substantial uncertainty about how the new law would be implemented" could result in insurers withdrawing from the individual insurance market, several factors could establish greater market stability in most states by 2020, including tax credits that would encourage individuals with low healthcare costs to sign up for coverage, as well as the Patient and State Stability Fund, which could be used to lower premiums of people with elevated healthcare costs and reduce costs to insurers. However, for one-sixth of the population, the non-group market will start to become unstable as of 2020 under AHCA. This population resides in states that would decide to waive two Affordable Care Act (ACA) provisions, the essential health benefits (EHBs) requirement and the community rating requirement. As such, insurers will no longer be required to cover all 10 EHBs outlined under ACA, and could raise premiums for individuals with pre-existing conditions. Over time, individuals that are less healthy "would ultimately be unable to purchase comprehensive nongroup health insurance at premiums comparable to those under current law, if they could purchase it at all", even with the additional federal funding aimed at lowering premiums for individuals with pre-existing conditions.

Impact on premiums and out-of-pocket costs

The report projects premiums would increase higher than under current law with implementation of AHCA until 2020. Premiums would increase an average of 20% more than under current law in 2018 and 5% more in 2019 as federal funding provided under the proposed legislation works to reduce premiums. As of 2020, premiums would vary depending on state decisions. They could be 4% lower in 2026 than under current law in states that do not request waivers (anticipated for 50% of the population), although premiums would generally be much lower for younger individuals and much higher for older. For one-third of the population, in states that make "moderate" alterations to the market regulations, premiums would be 20% lower than under the ACA by 2026, mainly because new cheaper plans would be introduced that provide far less coverage and benefits. Meanwhile, one-sixth of the population that resides in states that would waive the EHB and community rating restrictions would realise greater average reductions in premiums over time due to a narrower scope of coverage and fewer unhealthy people obtaining insurance. There would still be significant variation among healthy individuals versus those with pre-existing conditions.

The full CBO report can be found here.

Outlook and implications

Comparing the CBO score for the revised version of the bill with the agency's earlier projections issued on 13 March, this legislation would result in USD218 billion less net savings than previously reported by the CBO for the earlier version of the AHCA. Furthermore, the number of uninsured is slightly less (one million) than what the CBO projected with the earlier version of the legislation (see United States: 15 March 2017: CBO estimates 14 mil. individuals to lose or drop health insurance in 2018 under American Health Care Act). The report suggests that under current law, and despite some insurer exits in certain states, the insurance market is generally stable. The CBO noted that reasons for insurer exits from ACA marketplaces include the "substantial uncertainty about enforcement of the individual mandate and about future payments of the cost-sharing subsidies to reduce out-of-pocket payments" for lower-income individuals purchasing insurance on the exchanges. These uncertainties remain unaddressed by the current administration, and will continue to undermine the success of the ACA moving forward.

Meanwhile, the CBO report warns that although premiums will drop on average in most areas under AHCA, nearly one-sixth of the population will reside in states where two main ACA insurance regulations are waived causing potential instability in the market and making insurance unaffordable for millions with pre-existing conditions despite federal funding specifically targeted to help lower premiums for those individuals. The latest version of AHCA is unlikely to be passed in the Senate unchanged; however, the individual health insurance market is headed towards greater uncertainty unless reforms are introduced that could either resolve ongoing issues with the ACA or replace it with new legislation that would have a less significant impact on the number of uninsured in the country.