Last week we provided an overview of the proposed American Health Care Act (AHCA) intended to repeal and replace the Affordable Care Act (ACA). On March 13, the Congressional Budget Office (CBO) and the Joint Committee on Taxation released their cost analysis of this legislation. Keep in mind this is beginning of the legislative process and revisions could/will occur. Here are a few of their findings:
By ending the ACA’s expanded funding for Medicaid and replacing individual subsidies with the Patient and State Stability Fund, the CBO estimates that health programs for low-income Americans will decrease by $880 billion over the next decade. This would cut $935 billion from the federal deficit.
However, because the AHCA seeks to repeal Pay or Play taxes, the CBO says revenue is expected to decline by $599 billion dollars offsetting this federal deficit reduction. Therefore, the overall projected reduction in the deficit would be $337 billion by 2026.
The CBO estimates that the proposed AHCA will result in 14 million people going without insurance in 2018. “Some of those people would choose not to have insurance because they chose to be covered by insurance under current law only to avoid paying the penalties, and some people would forgo insurance in response to higher premiums,” the report concludes.
That number increases by 2026 to 52 million Americans (compared to 28 million who would be uninsured if the ACA continued). Half of those 52 million would be uninsured because they will no longer be eligible for Medicare.
Health insurance premiums are projected to be 10-20% higher in 2018 through 2019. The estimated hike is a reflection of the elimination of the Pay or Play individual mandate, as healthy people are more likely to drop coverage, driving up risk. Although there is an initial rise in premium, a 10% reduction is forecasted in 10 years as compared to the ACA.
As mentioned in last week’s report, the AHCA aims to allow health insurance companies to charge older Americans higher premiums than younger people. The current law allows a 3-to-1 ratio. Under AHCA, it would be 5-to-1.
The House Budget Committee approved the AHCA bill on March 16, 2017. Now the bill moves onto the Senate. With the release of the CBO’s report, some Senate legislators are not fully on board with the AHCA bill in its current state. Changes to the bill are expected.
National Insurance Services will continue to keep you abreast of all future developments. Download to read the CBO’s full report.