Policy and Regulation News

AHCA CBO Score Predicts 23M Uninsured, Higher Out-of-Pocket Costs

The Congressional Budget Office score for the American Health Care Act (AHCA) forecasts millions uninsured, more out-of-pocket payments and less coverage across the healthcare insurance market.

CBO report on AHCA raises uninsured

Source: Thinkstock

By Jesse Migneault

- The CBO report on the American Health Care Act (AHCA) found the bill would result in 23 million people losing insurance coverage over the next decade.  Other impacts of the bill include higher out-of-pocket costs for most patients and significant coverage reductions due to the elimination of the essential health benefits requirements. 

In 2018, 14 million more people would be uninsured under the AHCA versus the ACA, the CBO says.  By 2020, that would increase to 19 million, hitting 23 million by 2026.

By 2026, an estimated 51 million people (65 and under) would be uninsured, a stark contrast to the 28 million under ACA.  That is seven million more uninsured than when the ACA started. 

This includes several million people who would use the AHCA’s tax credits to purchase policies that would not cover major medical care, leaving them essentially uninsured.

The bill, which narrowly passed in the House before the CBO had a chance to issue a score on the final legislative package, would reduce the cumulative federal deficit by $119 billion from 2017-2026.

READ MORE: House Passes AHCA To Repeal and Replace ACA By 1 Vote Margin

That amount of savings is $32 billion less than the estimated amount reported by the House prior to the vote.

The federal budget would see an estimated reduction in direct spending of $1.1 trillion and reduce revenues by $992 billion for the 2017-2026 period.

The provisions dealing with health insurance coverage would reduce the deficit, on net, by $783 billion. The non-coverage provisions would increase the deficit by $664 billion, mostly by reducing revenues.

The CBO did find a slight overall decrease in the premiums for individual plans. This decrease was due mostly to the skeleton coverage the policies would provide, and the “smaller proportion of health care costs” that the payments would cover.

The largest savings in the AHCA come from steep cuts to Medicaid spending and ACA subsidies for individual plans.The subsidies would be replaced with health insurance tax credits.

READ MORE: Healthcare Orgs React to House Vote on American Health Care Act

Those tax-credits, the CBO determined, would be used by some people “to purchase policies that would not cover major medical risks and that are not counted as insurance in this cost estimate.”

Any potential savings would be partially offset by new spending for the Patient and State Stability Fund, which is designed to reduce premiums. 

A larger portion of any savings would be lost to a massive reduction in revenue.  This would come from eliminating penalties charged to employers and individuals who do not have insurance.

The largest deficit increases would not be directly related to health insurance at all, but from altering ACA tax provisions.  These would include eliminating a surtax on net investment income, the permanent repeal of annual fees on health insurers, and the reduction for the income threshold for determining the tax deduction for medical expenses.

The report does find individual markets would continue to be stable in many parts of the country, although it is uncertain how the AHCA would impact existing markets, with payers leaving or not offering plans at all.

READ MORE: Affordable Care Act Cuts Uninsured Rate by 6.4% Since 2013

These forecasts assume that premium subsidies, and grants to states from the Patient and State Stability Fund, would be available and used to defray premium costs for individuals with high health care expenditures.

The largest risk to insurance market stability comes from two AHCA state waivers; one which would allow states to modify essential health benefits (EHBs). The second would allow insurers to set premiums based on an individual’s health status if the person had not demonstrated continuous coverage.

The net result of the AHCA on premiums would be good news for those who are younger and healthier than average. It would be bad news for those who are less healthy, older, or those with preexisting or newly acquired medical conditions. It would also be detrimental for those with community-rated premiums.

Individuals in those categories could ultimately be unable to purchase health insurance at ACA comparable premiums, if they could purchase insurance at all.  This is factoring in any additional premium offset funding made available under the AHCA.

The AHCA would leave about one-sixth of the population living in an area with an unstable individual market by 2020.  Unstable marketplaces could result in massive increases in out-of-pocket costs. This could result in people skipping needed healthcare

Services likely to be chopped from coverage under the AHCA include: maternity care, mental health and substance abuse benefits, rehabilitative and habilitative services, and pediatric dental benefits.

In addition, the ACA’s ban on annual and lifetime limits would only apply to health benefits defined as essential by each state.

For people who have relatively high health care spending, out-of-pocket payments would increase most in the states which obtained waivers for both the EHBs and community rating.

Individual policyholders (before any tax credits were applied) would see an increase of 20 percent on premiums in 2018, and five percent increase by 2019, compared to premiums under the ACA. This was due mostly to the elimination of current subsidies and CSR funding. 

These projections on premium waiver subsidies remain unclear due to the state’s responses being uncertain.