CBO scores the AHCA: 5 things to know

The Republican-proposed American Health Care Act would reduce the federal deficit, but leave millions more Americans uninsured over the next decade, according to the much-anticipated estimate from the Congressional Budget Office and the Joint Committee on Taxation.

The CBO-JCT estimate uses March 2016 as a baseline, with some adjustments for legislation passed since then. It assumes the AHCA would be enacted by May 2017.

Here are the main estimated effects of the legislation, according to the CBO and JCT.

1. The AHCA would reduce the federal deficit by roughly $337 billion over the next decade. Several provisions of the legislation — namely Medicaid and individual subsidy reductions — would reduce the federal deficit by $935 billion from 2017 to 2026, according to the report. These savings would be partially offset by other provisions that increase the federal deficit by a total of $599 billion — primarily the new tax credits and revenue reductions linked to eliminating the individual mandate and taxes. All together, the CBO and JCT estimate the legislation would shrink the deficit by 2026.

2. The CBO and JCT estimate 24 million fewer Americans would be insured by 2026. By next year, 14 million more people would be uninsured, according to the report. This initial drop in coverage is primarily attributed to repealing the individual mandate, indicating many would go uninsured by choice. The number of uninsured is expected to increase to 21 million by 2020 and to 24 million by 2026 due mostly to Medicaid changes, according to the report.

A smaller factor in the drop in coverage is an expected drop in employer-based coverage. As part of its overall estimate of uninsured Americans, the CBO projected about 7 million fewer people would enroll in employer-based coverage by 2026. This estimate is based on the assumption that the elimination of the mandate penalties and the broader tax-credit offerings would make nongroup coverage more attractive. The CBO expects businesses with younger employees earning higher incomes are most likely to stop offering insurance coverage.

3. Average premiums would spike within the first two years of implementation, and then begin to decrease until they are 10 percent below current levels. Average premiums in the individual market would increase 15 to 20 percent over current levels in 2018 and 2019 under the AHCA, according to the report. This increase is directly related to the elimination of the individual mandate — fewer healthy people would enroll, driving up costs.

However, the CBO expects these increases to eventually be offset by other factors. These offsetting factors include the Patient and State Stability Fund, which would help states offset premium increases in the individual market, and an increase in the number of younger enrollees, who will be able to buy coverage at a lower cost due to the change in age rating rules. The AHCA changes ratios that let payers to charge customers differently depending on their age. Under the AHCA, commercial insurers would be able to charge older Americans up to five times more than their younger counterparts for the same plan.

The CBO expects these factors to begin have an effect on premiums in 2020, so that by 2026, premiums for individuals in the nongroup market are expected to be 10 percent lower than current premiums. However, these changes are averages — due to the age rating changes, older enrollees will likely experience higher commercial premiums while younger enrollees will experience lower premiums.

4. The health insurance market is expected to remain stable under the proposed legislation. The AHCA would keep the nongroup market stable by offering subsidies to buy insurance, and though these subsidies would likely be less generous than those enrollees are currently receiving, the legislation's other changes would keep the cost of premiums low enough to ensure enough healthy people enter the risk pool. The CBO and JCT also found that the nongroup market is stable under the current law, however.

5. The estimates come with a disclaimer. Because the CBO and JCT cannot predict how various industry players would react to the legislation, some estimates are uncertain, the report states. The agencies also note they were unable to provide estimates of the macroeconomic budgetary impact due to a short deadline. "[B]ecause of the very short time available to prepare this cost estimate, quantifying and incorporating those macroeconomic effects have not been practicable," the report reads.


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