ACA Watch 2017: CBO Reveals the Cost of the AHCA

On May 24, the Congressional Budget Office (CBO) released their “score” of the American Health Care Act (AHCA) final bill that passed the House in early May. This new version of the bill includes four amendments to the original bill.

The CBO is an independent group that provides Congress with analyses for economic and budget decisions. Scoring by the CBO is customary for any bill that is to have an effect on the federal budget. To have ample support and move forward, a bill must not add to the federal deficit.

The analysis by the CBO shows the projected effects of the implementation of the AHCA, including all the amendments and modifications to the original.

1. Effect on federal budget
   •  Reduces the federal deficit by a net $119 billion between 2017-2026.

2. Effect on uninsured population
   • The number of uninsured individuals under the current law is 26 million with a project reaching 28 million by the year 2026 if no changes are made.
   • The estimate of uninsured individuals resulting from the passage of AHCA is 42 million in 2018, 47 million in 2020, and 51 million in 2026.
3. Market Stability
   • New tax credits and other changes like the Patient and State Stability Fund would lower average premiums enough to attract a sufficient number of relatively healthy people to stabilize the market.
   • The combination of subsidies to purchase individual health coverage and the new rules regulating the market will result in a relatively stable individual market, i.e. enough carriers participating in the marketplace and stable and reducing premiums.
     • There is, however, some uncertainty in the reaction of carriers prior to 2020, i.e. the years before the new provisions are implemented.
     • There is also some concern that should the states exercise waivers and modify the definition of essential health benefits, community rating of premiums, and imposing new ways to manage risk through either establish health underwriting or premium penalties for those without continuous coverage may result in individuals who may shy away from the market.
     • Additional concern is voiced regarding the potential for growing parity between rates for healthy and rates for sick individuals.

4. Effect on Premiums
   • Premiums in the individual market would increase by an average of 20% in 2018 and 5% in 2019 due to funding provided to reduce premiums.
   • Beginning in 2020, pricing will vary state-by-state based upon how, when, and if they exercise the state waiver option and what part of the funding from the Patient and State Stability Fund is applied to reduce premiums.
     • For states who do not request waivers, average premiums in the individual market will be about 4% lower in 2026 than under the current law,
     • For states making moderate changes, average premiums in the individual market will be about 20% lower in 2026 than under the current law,
     • For states making changes to both community rating and essential health benefits, average premiums in the individual market will be lower.
       • Younger, healthier people will purchase insurance
       • Many more types of plans with varying coverage levels offered
       • Less healthy individuals, however, may begin to face higher premiums even with the funding available to help reduce premiums
       • With the availability of plans offering less coverage, out-of-pocket costs may increase to participants
5.  Variability
   • In this newest bill version, there are many more options available to the states making it difficult to accurately project the outcomes of consumers, carriers, and states.
   • The array of market regulations that states could implement makes estimating the outcomes especially uncertain.

Congress and the Administration intend on introducing additional regulations and other legislative actions to build on these provisions and address new items that cannot be part of this budget reconciliation. The process is still unfolding and we are dedicated to keep you informed every step of the way on our ACA Watch 2017 page.