CBO Report: Nongroup market will be stable, younger, & healthier under the AHCA. The flip side: older, sicker people may be priced out.

The Congressional Budget Office came out with its much-anticipated report on the American Health Care Act (AHCA) on Monday, and the call on how many Americans will be without health insurance surpasses what pundits had been reading in the tea leaves.

While the CBO’s projection of 14 million people losing coverage in 2018—the year of the midterm Congressional elections—falls in line with what Brookings and others had anticipated, the projected impact in the out years far exceeds what anyone had expected: 21 million fewer Americans will have health insurance in 2020 than they would under the ACA, and 24 million fewer will be covered in 2026.

The CBO projects that in 2026, an estimated 52 million Americans would be uninsured under AHCA compared with 28 million under the ACA.

A full copy of the report is available here.

“The reductions in insurance coverage between 2018 and 2026 would stem in large part from changes in Medicaid enrollment—because some states would discontinue their expansion of eligibility, some states that would have expanded eligibility in the future would choose not to do so, and per-enrollee spending in the program would be capped,” the CBO report states.

For deficit hawks, the CBO report has some good news. The AHCA would reduce deficits $337 billion over the next 10 years, due in large part to the $880 billion reduction in federal spending on Medicaid and elimination of the ACA’s subsidies for individual policies purchased on the marketplace.

The CBO report says that the nongroup market will skew younger and healthier under the AHCA. For that reason and several others, that part of the insurance will be stable, according to the CBO. In other words, there will be insurers selling policies to people who don’t have coverage through an employer or a public payer (Medicaid and Medicare), and “the market will not be subject to an unsustainable spiral of rising premiums.” Interestingly, the CBO also projected that the nongroup market would have been stable under the ACA as well, despite all the recent doom and gloom.

A younger and healthier risk pool is also one reason the CBO projects that, after increasing by 15% to 20% in 2018 and 2019, premiums in the nongroup market will wind up being 10% less expensive under the AHCA than it would have been under the ACA.

But another way to view a younger and healthier risk pool is that the AHCA may, effectively, price older and less healthy people out of the nongroup market.

For one thing, under the AHCA, the insurers will be allowed to price premiums so they are five times higher for older people than for younger people. The ACA limited that ratio to 3:1.

The AHCA’s new age-based tax credit scheme does mean that older people will get more help with premiums. The tax credits will start at $2,000 per year for people under 30 and increase to $4,000 for people 60 and older. But the CBO report notes that the 2:1 ratio does not offset the 5:1 premium price ratio.

The new actuarial value rules may also work against older and sicker people getting coverage. Starting in 2020, the House Republican legislation calls for getting rid of the ACA’s prohibition on low (below 60%) actuarial plans. As a result, the CBO report says, insurers could choose to sell only plans with a low actuarial value with premiums priced close to the premium tax credit for younger people. The flip side: “Insurers might be less likely to offer plans with high actuarial value out of fear of attracting a greater proportion of less healthy enrollees,” the report says.

The AHCA does have some provisions to address the problem of people being priced out of the nongroup market, including $80 billion from 2018 to 2026 for a new Patient and State Stability Fund. The fund will pay for grants to states that they could use in ways that would result in reduced premiums.