A couple of weeks ago, the Congressional Budget Office (CBO) issued its cost estimate for the American Health Care Act (AHCA) that was passed by the U.S. House of Representatives to repeal and replace parts of the Affordable Care Act (ACA). The numbers were not pretty. The CBO projected that 14 million more people would be uninsured under the AHCA than under the ACA in 2018 and the number would increase to 23 million more people being uninsured by 2026.
It also estimated that premiums in the individual market would increase by an average of 20% in 2018 and 5% in 2019. But starting in 2020, average premiums would vary depending on whether a State was granted a waiver to redefine essential health benefits or limit community rating. The CBO estimated that States not requesting waivers would see premiums in the individual market decrease under the AHCA by 4% in 2026. States adopting moderate market regulatory changes, such as redefining essential health benefits, could see premiums decrease by as much as 20% in 2026 due to policies covering fewer benefits.
The CBO warned that States implementing waivers to redefine essential health benefits and limit community rating risk destabilizing their individual insurance markets. Over time, the CBO explained, “less healthy individuals (including those with preexisting or newly acquired medical conditions) would be unable to purchase comprehensive coverage with premiums close to those under current law and might not be able to purchase coverage at all.”
Not surprisingly, many Republicans pushed back on the CBO estimate and questioned the validity. This week, the Office of the Actuary within the Centers for Medicare & Medicaid Services (CMS) gave them something to work with by issuing its own estimate. Although the numbers are still not pretty, they are a bit rosier than the CBO’s estimate. For 2018, CMS projects the number of uninsured under the AHCA would be 4 million more than under the ACA with the number increasing to 13 million more people being uninsured by 2026. That’s a difference of 10 million people from the CBO estimate.
CMS estimates average gross premiums (i.e., before application of the refundable premium tax credit) will be approximately 16% lower in 2020 under the AHCA than under the ACA. However, the average net premiums (i.e., the amount an individual would pay) would be approximately 10% lower.
The picture is less rosy for 2026. CMS estimates average gross premiums would be approximately 13% lower in 2026 under the AHCA than under the ACA but the average net premiums would be 5% higher. The increase in average net premiums is due to increased costs not being sufficiently offset by refundable tax credits or other subsidies. In addition, CMS estimates cost-sharing amounts would be a whopping 61% higher in 2026 under the AHCA than under the ACA.
While CBO and CMS reach different conclusions about the number of uninsured and future premium costs, they agree on one key point – States implementing waivers to redefine essential health benefits and limit community rating risk destabilizing their individual insurance markets.
Why did CBO and CMS reach different conclusions? Well, they’re estimates based on assumptions and the assumptions are really just well-educated guesses. Both CBO and CMS caution there are a whole lot of unknowns and that it is difficult to predict how States, employers, individuals and insurers will act in response to future legislation.
So what are we to make of these estimates? Both reports seem to make a few things clear – if the AHCA becomes law, the number of uninsured will increase by several million people, there will be people who end up paying higher premiums or more in out-of-pocket costs and some who might not be able to buy coverage at all.