The Congressional Budget Office (CBO) has released its findings regarding the overall effect of the amended version of the American Health Care Act (AHCA) that the House narrowly passed on May 4. The CBO estimates that enacting the AHCA would reduce federal deficits by $119 billion – $32 billion less than the CBO estimate of the earlier draft of the AHCA that GOP leadership tabled before a vote in March. The report also indicates that nearly 23 million more individuals will have no coverage by 2026 under the AHCA as compared to that number under current law.

Leaders from both sides of the aisle were quick to pounce on the CBO report to tout their respective positions for or against the AHCA. The lively debate remains focused on the effect the AHCA will have on individual and small group insurance markets, older Americans, and those with pre-existing conditions.

The CBO states that the amended AHCA still will realize large savings from Medicaid cuts and repealing the Affordable Care Act’s (ACA’s) health care cost subsidies. However, the CBO report notes that one of the largest costs under the AHCA would be new tax credits for individuals to buy health insurance. The new tax credit component remains one of the bill’s more unpopular features, especially in the Senate. There, talks continue over drafting a different version of the AHCA which would then need to be reconciled with the House version. The CBO notes that the projected savings would be partially offset by spending for a new Patient and State Stability Fund (aka high-risk insurance pool) and lost revenues from repealing ACA employer and individual mandate penalties.

Even while some fiscal conservatives focus on the bill’s financial impact, the more contentious debate emerging in the wake of the CBO report concerns the AHCA’s potential effect on health coverage. The report estimates that 14 million more people – the same number it estimated under the first version of the AHCA – would be uninsured next year than under current law. The CBO states that most of the increase would stem from repealing the individual mandate penalty, which forecasters expect will lead many to forgo insurance as premiums rise.

Further, the CBO predicts that the number of additional uninsured people would reach 23 million following additional changes to individual subsidies and to Medicaid (only one million fewer than the CBO’s March estimate) in 2026.

Debate also continues over the potential destabilizing effect the AHCA would have on the health insurance market. The CBO cites new subsidies as well as grants to states from the Patient and State Stability Fund as factors that would reduce costs to insurers for covering people with high health care expenditures. Even though new tax credits would be structured differently from current subsidies – and would generally be lower – other changes would, in the CBO’s view, lower average premiums sufficiently to attract enough relatively healthy people to stabilize the market. Thus, the CBO states that the non-group insurance market would probably be stable in most areas under the AHCA, but the bill’s opponents strongly disagree.

The report does note that about 15% of the U.S. population lives in areas in which the non-group market would start to become unstable beginning in 2020 due to two controversial waivers that lawmakers added to the revised AHCA. Under the revised bill, some states will be allowed to set their own definition of essential health benefits (EHBs). The revised bill would also allow insurers to expand their age-rating bands and set premiums on the basis of an individual’s health status if the person has not demonstrated continuous coverage.

The CBO expects that the foregoing waivers would lead to higher community-rated premiums, and ultimately result in less healthy individuals (including those with pre-existing or newly acquired medical conditions) being unable to purchase comprehensive non-group health insurance at premiums comparable to those under the ACA, if at all. Thus, the non-group markets in those states would become unstable for people with higher-than-average expected health care costs, which might make those who need coverage the most unable to get it.

The CBO stated, just as it had in its March report, that overall the AHCA would tend to increase average premiums in the non-group market by as much as 20% over the next two years. This would happen once individual penalties under the ACA disappear, which likely will cause fewer relatively healthy people to elect coverage and create higher risks for carriers to insure.

But, the CBO says that starting in 2020 the increase in average premiums from repealing the individual mandate penalties would be more than offset by the overall effect of issuing grants to states from the Patient and State Stability Fund. This would eliminate the requirement for insurers to offer plans covering certain percentages of the cost of covered benefits and promoting an overall younger mix of enrollees.

The CBO report estimates that average premiums for single policyholders in the non-group market would be lower than under the ACA by 2026. But, the report also notes there could be variations by state from as little as 4% lower premiums to as much as 30% lower premiums. However, the CBO states that once carriers start to base premiums on the bill’s 5:1 (or higher) age bands, younger enrollees would see reduced premiums but older enrollees’ premiums would rise significantly – a point that Democratic leaders continue to stress.

Moreover, in states that chose to narrow the scope of EHBs, people enrolled in non-group insurance that used services or benefits no longer included as EHBs would experience substantial increases in out-of-pocket spending on health care, or would choose to forgo the services. In particular, the report lists out-of-pocket spending on maternity care and mental health and substance abuse services as likely to increase by thousands of dollars in a given year for the non-group enrollees who would use those services. Moreover, the CBO advises that the ACA’s ban on annual and lifetime limits on covered benefits would no longer apply to health benefits not defined as essential in these states. Thus, some enrollees could see large increases in out-of-pocket spending with the return of annual or lifetime limits. In general, the report forecasts that out-of-pocket payments for people who have relatively high health care spending would increase most in the states that obtained waivers from the requirements for both the EHBs and community rating.

The battle over the AHCA is heating up as senators continue to work on their version of an AHCA bill that is likely to vary significantly from the House version. The CBO’s latest analysis surely bolsters some of the arguments regarding the AHCA’s long-term fiscal effects, but it also clearly gives opponents ammunition for their vocal public battle to erode support for the bill.

The current administration remains committed to repealing and replacing the ACA, and we expect to see major changes in health care law and how health care is delivered. It appears, however, that the CBO findings (as well as recent survey results showing fewer Americans who oppose the ACA) point to the two sides digging in for a longer battle than many ACA opponents had envisioned. We will continue to update you as we monitor this ongoing saga.

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