The Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation (JCT) have completed an estimate of the direct spending and revenue effects of the revised American Health Care Act (AHCA), as passed by the House of Representatives. The CBO and the JCT estimate that enacting the revised legislation would reduce the cumulative federal deficit over the next decade (2017–2026) by $119 billion.
The agencies also estimate, however, that in 2018, 14 million more people would be uninsured under the AHCA than under the Patient Protection and Affordable Care Act (PPACA). The increase in the number of uninsured people relative to the number projected under the PPACA would reach 19 million in 2020 and 23 million in 2026. In 2026, an estimated 51 million people under age 65 would be uninsured, compared with 28 million who would lack insurance that year under the PPACA. Under the AHCA, a few million of those people would use tax credits to purchase policies that would not cover major medical risks.
The agencies expect that the nongroup health insurance market in many areas of United States would continue to be stable in 2020 and in later years as well, including in some states that obtain waivers from market regulations. Even though the new tax credits, which would take effect in 2020, would be structured differently from the current subsidies and would generally be less generous for those receiving subsidies under the PPACA, other changes––including money available through the Patient and State Stability Fund––would, in the agencies’ view, lower average premiums enough to attract a sufficient number of relatively healthy people to stabilize the market.
However, the agencies estimate that approximately17% of the U.S. population resides in areas in which the nongroup market would start to become unstable beginning in 2020. That instability would result from market responses to decisions by some states to waive two provisions of the PPACA, as would be permitted under the new legislation.
One type of waiver would allow states to modify the requirements governing “essential health benefits,” which set minimum standards for the benefits that insurance in the nongroup and small-group markets must cover. A second type of waiver would allow insurers to set premiums on the basis of an individual’s health status if the person had not demonstrated continuous coverage; that is, the waiver would eliminate the requirement for so-called community rating for premiums charged to such people.
The CBO and the JCT anticipate that most healthy people applying for insurance in the nongroup market in those states would be able to choose between premiums based on their own expected health care costs (medically underwritten premiums) and premiums based on the average health care costs for people who share the same age and smoking status and who reside in the same geographic area (community-rated premiums). By choosing the former, people who are healthier than average would be able to purchase nongroup insurance with relatively low premiums, according to the agencies.
As a consequence, the CBO and the JCT expect that the waivers in those states would have another effect: Community-rated premiums would increase over time, and people who are less healthy (including those with pre-existing or newly acquired medical conditions) would ultimately be unable to purchase comprehensive nongroup health insurance at premiums comparable with those under the PPACA. As a result, the nongroup markets in those states would become unstable for people with higher-than-average expected health care costs. That instability, the agencies say, would cause some people who would have been insured in the nongroup market under the PPACA to be uninsured. Others would obtain coverage through a family member’s employer or through their own employer.
The CBO and the JCT projected premiums for single policyholders under the AHCA (before any tax credits were applied) and compared those with the premiums projected under the PPACA for policies purchased in the nongroup market. The AHCA, as passed by the House, would tend to increase such premiums before 2020 compared with those under the PPACA––by an average of approximately 20% in 2018 and 5% in 2019 as the funding provided by the AHCA to reduce premiums had a larger effect on pricing.
Starting in 2020, however, average premiums would partly depend on waivers granted to states and on how those waivers were implemented, and partly on what share of the funding available from the Patient and State Stability Fund was applied to premium reduction.
Source: CBO; May 24, 2017.