CBO: AHCA Would Save $119 Billion Net, Increase Uninsured by 23 Million

By:
Chris Gaetano
Published Date:
May 25, 2017
STORY NO.6

The Congressional Budget Office, calculating the effects of the American Health Care Act, estimates that the bill would save about $119 billion net over a decade ($1.1 trillion in reduced spending minus $992 in reduced revenues) and cause 23 million people to go uninsured over that same time period.

The deficit reduction is about $32 billion less than what had been calculated in the last version of the bill that the CBO scored in March. As the bill stands now, the CBO said that the largest savings would come from reductions in outlays for Medicaid and from the replacement of the Affordable Care Act’s (ACA’s) subsidies for nongroup health insurance with new tax credits for nongroup health insurance (see figure below). The CBO said those savings would be partially offset by other changes in coverage provisions—spending for a new Patient and State Stability Fund, designed to reduce premiums, and a reduction in revenues from repealing penalties on employers who do not offer insurance and on people who do not purchase insurance. Meanwhile, the largest increases in the deficit would come from repealing or modifying tax provisions in the ACA that are not directly related to health insurance coverage—such as repealing a surtax on net investment income, repealing annual fees imposed on health insurers, and reducing the income threshold for determining the tax deduction for medical expenses.

As for insurance coverage, the CBO broadly defined private health insurance coverage as consisting of a comprehensive major medical policy that, at a minimum, covers high-cost medical events and various services, including those provided by physicians and hospitals. This definition encompasses most private health insurance plans but excludes things such as policies with limited insurance benefits, "dread disease" plans that cover only specific illnesses, supplemental plans that pay for medical expenses other policies do not, fixed-dollar indemnity plans paying a certain amount per day for illness or hospitalization, and single-service plans like dental-only or vision-only policies. The CBO counts people who have only policies like these as uninsured. With this in mind, the CBO estimates that 14 million more people would be uninsured under the AHCA than under current law, which would then grow to 19 million additional uninsured people in 2020 and 23 million by 2026. The CBO estimates that, by this time, the total number of uninsured people would be 51 million people under the age of 65, compared to the 28 million that would lack insurance under current law. 

The CBO report also predicted an immediate increase in premiums by an average of about 20 percent in 2018 and 5 percent in 2019. After that point, however, individual states can begin requesting waivers for certain mandates in the AHCA, which the CBO report said would affect the size of premiums.

If states do not request any waivers, then on average premiums in the nongroup market would be about 4 percent lower in 2026 than under current law, though this would vary based on age. Younger people would have even lower premiums, but older people would face higher premiums because of a provision allowing insurers to charge them more. 

States making moderate changes in market regulations would see average premiums lower by 20 percent in 2026 than under current law because, on average, insurance policies would provide fewer benefits. However, like the previous group, rates would vary based on age and where in the state someone is. The CBO said the estimated reductions in average premiums range from 10 percent to 30 percent in different areas of the country. The reductions for younger people would be substantially larger and those for older people substantially smaller.

Finally, in states that obtain the full extent of the waivers available would have lower average premiums due to fewer benefits and more young and healthy people purchasing insurance. However, it said that the rates would vary widely according to health status and types of benefits provided. Less healthy people, said the CBO, would face "extremely high" premiums despite the additional funding provided by the bill. Over time, the CBO said, it would become more difficult for less healthy people (such as those with preexisting medical conditions) to purchase insurance because their premiums would increase rapidly. As a direct consequence of this, however, average premiums for people who did purchase insurance would generally be lower than in other states, though the CBO did not have an estimate for just how much lower those premiums would be. 
 

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