Republican health care bill would increase number of uninsured, maintain stability in individual market, Congressional Budget Office projects

The nonpartisan Congressional Budget Office (CBO) late Monday, March 13, 2017, released its analysis projecting that enactment of the American Health Care Act (AHCA) would increase the number of uninsured Americans by 4 million in 2017, rising to an increase of 14 million by 2018 and to 24 million by 2026.1 Under the AHCA, the total number of uninsured would stand at 52 million in 2026, approximately 19% of the US population under age 65. By comparison, approximately 10% of nonelderly Americans currently are uninsured, and the CBO projects that the uninsured population in the US would remain about that level each year through 2026 under the Affordable Care Act (ACA).

According to the CBO, the nongroup health insurance market “would probably be stable in most areas” under either the ACA or the AHCA.

AHCA summary

House Republican leaders introduced the AHCA last week. The bill is intended to repeal key provisions of the ACA and enact alternative health care policies via the budget reconciliation process. In general, the AHCA would maintain the ACA’s tax credits and states’ option to expand Medicaid in their current forms through December 31, 2019.

Beginning January 1, 2020, the AHCA would repeal the ACA’s income-based tax credits and replace them with new age-based tax credits that begin to phase down for individuals with incomes that exceed $75,000 annually ($150,000 for joint filers). In addition, the AHCA would repeal the higher federal Medicaid contributions for states that expanded Medicaid under the ACA and limit federal funding to state Medicaid programs on a per capita basis.

For a more complete summary of the AHCA see last week’s Reg Pulse blog.

Key provisions of CBO analysis

Reflecting the restructuring of federal tax credits for the purchase of health insurance coverage, programmatic changes to Medicaid and the repeal of numerous tax provisions, the CBO projects that the AHCA would reduce the federal budget deficit by $337 billion from 2017 through 2026.

Highlights of key provisions of the CBO analysis are provided below.

Health coverage

The CBO projects that the AHCA’s elimination of tax penalties under the ACA’s individual mandate would result in about 4 million additional people becoming uninsured in 2017. The number of additional uninsured would increase to 14 million in 2018 and to 16 million in 2019, largely as a result of the elimination of penalties in the individual market.

In 2020, the CBO and Joint Committee for Taxation (JCT) project that the elimination of the individual mandate penalties in conjunction with the  AHCA’s health insurance tax credit and Medicaid provisions would result in 21 million more people being uninsured 2 than would be under the ACA. This figure includes projections of:

  • Medicaid: -9 million enrollees
  • Individual market: -9 million enrollees
  • Employer-sponsored coverage: -2 million enrollees

The CBO and JCT project that 48 million people under age 65 – 17% of the nonelderly population – would be uninsured in 2020 under the AHCA.

By 2026, the CBO and JCT project that 24 million more people in the US would be uninsured3 than would be under the ACA. This projection includes:

  • Medicaid: -14 million enrollees
  • Individual market: -2 million enrollees
  • Employer-sponsored coverage: -7 million enrollees

The CBO and JCT project that 52 million people under age 65 – 19% of the nonelderly population – would be uninsured in 2026 under the AHCA.

As a result of the AHCA’s age-based tax credits and more permissive rules for age rating (see below), the CBO and JCT project that the increase in the uninsured population would be disproportionately larger among older people with lower incomes, e.g., individuals ages 50 to 64 with annual incomes that do not exceed 200% of the federal poverty level ($24,120 for 1 person in 2017).4

Individual market premiums

The AHCA would generally result in higher premiums in the nongroup market in 2018 and 2019, with the CBO projecting that premiums would be 15% to 20% higher than projected under the ACA. Premiums generally would be higher as a result of the repeal of penalties under the ACA’s individual mandate.

The CBO and JCT project that beginning in 2020, the increase in average premiums in the individual market would be “more than offset” by the combination of three factors:

  • The mix of people enrolled in coverage in the nongroup market shifting to be younger than is expected under current law
  • The elimination of actuarial value requirements for plans eligible for purchase with federal tax credits
  • Reinsurance programs supported by the AHCA’s Patient and State Stability Fund

As a result, the CBO and JCT project that premiums for single policyholders in the nongroup market will be 10% lower than projected under the ACA. That said, the CBO analysis highlights that premiums would vary for people of different ages as a result of an AHCA provision that would permit insurers to charge older enrollees five times as much as younger enrollees (age rating of 5:1), rather than three times as much under the ACA (age rating of 3:1).

Arising from the structure of the AHCA’s age-based tax credits, the CBO and JCT project that a larger share of enrollees in the nongroup market would be younger people and a smaller share would be older people than under the ACA.  By 2026, the CBO and JCT project that premiums in the nongroup market would be 20% to 25% lower for a 21-year-old; 8% to 10% lower for a 40-year old; and 20% to 25% higher for a 64-year-old than under the ACA.

The CBO and JCT project that the AHCA’s age-based tax credits on average in 2020 would be about 60% of the average tax credit and subsidy available under the ACA. By 2026, the CBO and JCT project that the average AHCA tax credit would be about 50% of the ACA’s tax credit and subsidy.

In addition, the CBO indicates that the AHCA’s elimination of the ACA’s actuarial value requirements for plans eligible for purchase with federal tax credits could result in insurers offering more plans with less generous benefits and premiums that are closer to the amounts of the AHCA’s tax credits. As a result, individuals’ cost-sharing payments, including deductibles, in the nongroup market “would tend to be higher than those anticipated” under the ACA, according to the CBO.

Medicaid

The CBO and JCT estimate that the AHCA’s repeal of the ACA’s higher federal Medicaid contributions for states that expanded Medicaid under the ACA and the enactment of per capita caps on federal Medicaid funding would reduce federal Medicaid spending by $880 billion from 2017 through 2026. This provision would result in Medicaid spending being 25% lower in 2026 than what CBO projects under the ACA. Fourteen million fewer people would be expected to be enrolled under Medicaid in 2026 under the AHCA.

As a result of changes the AHCA would make to federal funding to states for the ACA’s expansion population, the CBO projects that the higher federal matching rate would apply for fewer than 5% of enrollees newly eligible under the ACA by the end of 2024.

Tax provisions

The CBO projects that the AHCA would reduce federal revenue by $883 billion from 2017 to 2026, including a $210 billion reduction in revenue stemming from the elimination of tax penalties under the ACA’s individual and employer mandates.

Notable among the repealed tax provisions not directly related to the ACA’s health coverage mandates are the increased Medicare hospital insurance tax ($117.3 billion from 2017 through 2026), the surtax on investment income for higher income individuals ($157.6 billion from 2017 through 2026), and the ACA’s health insurer fee ($144.7 billion from 2017 through 2026).

Status of the legislative process

The House Energy and Commerce Committee, which has jurisdiction over Medicaid provisions, and the House Ways and Means Committee, which has jurisdiction over tax provisions, approved their respective sections of the bill Thursday, March 9, 2017.

The House Budget Committee is expected to consider the AHCA on Thursday, March 16. Changes to the legislation may be incorporated by the House Rules Committee before it is brought before the full House for a vote. If approved by the full House, the bill would then go to the Senate for consideration.

Congressional Republicans are using the budget reconciliation process to move the AHCA to make it possible for the Senate to consider and pass the bill with a simple majority of 51 votes, rather than 60 votes generally needed to bring legislation up for a vote under Senate rules. As a result, the provisions of the legislation must meet strict criteria as to whether the individual provisions are specifically related to the federal budget deficit, taxes or the federal debt limit. The Senate parliamentarian would review any challenges to specific provisions in the legislation and rule on whether the provision could be included in the reconciliation bill or would have to be removed.

Once reconciliation legislation is cleared by the Senate parliamentarian, the Senate could take up the bill. If there were no amendments to the House bill, the Senate could pass it with at least 51 votes and send the bill directly to President Trump’s desk. If there were amendments to the bill in the Senate, the Senate could approve the bill with at least 51 votes, and it would go back to the House for a final up or down vote.

Congressional Republicans’ goal is to send legislation to President Trump for signature into law before adjourning for spring recess on April 7, 2017.

Authors:

Anne Phelps
Principal | Deloitte Advisory
US Health Care Regulatory Leader
Deloitte & Touche LLP
Latest conversations from Anne Phelps on Twitter

Daniel Esquibel
Senior Manager | Deloitte Advisory
Deloitte & Touche LLP

1“American Health Care Act: Budget Reconciliation Recommendations of the House Committees on Ways and Means and Energy and Commerce,” Congressional Budget Office cost estimate, March 13, 2017.
2Note: Figures are provided by the CBO and presumably do not add up to 21 million due to rounding.
3Note: Figures are provided by the CBO and presumably do not add up to 24 million due to rounding.
4Annual Update of the HHS Poverty Guidelines, Department of Health and Human Services, January 31, 2017.

 

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