CBO Releases Score of AHCA Legislation

May 26, 2017

This week the Congressional Budget Office (CBO) released its estimate of the direct spending and revenue effects of the American Health Care Act (AHCA) of 2017 (H.R. 1628), which was passed by the House of Representatives. The CBO estimates that the bill would reduce the cumulative federal deficit from 2017-2026 by $119 billion and increase the number of people who are uninsured by 23 million in 2026.

In comparison with the estimates for the previous version of the bill, under the House-passed version, the number of people with health insurance would be slightly higher and average premiums for insurance purchased individually—that is, nongroup insurance—would be lower, in part because the insurance, on average, would pay for a smaller proportion of health care costs. In addition, the CBO expects that some people would use the tax credits authorized by the Act to purchase policies that would not cover major medical risks and that are not counted as insurance in this cost estimate.

The $119 billion 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. 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. 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.

According to the CBO, the bill would result in significant changes in premiums according to people’s age. They estimate that under the bill, premiums for older people could be five times larger than those for younger people in many states. As a result:

  • For older people with lower income, net premiums would be much larger than under current law.
  • For younger people with lower income, net premiums would be about the same or smaller, depending on the states approach to regulation.
  • For people with higher income, net premiums would be reduced among people of most ages, on average.

The CBO states that as “a result of the narrower scope of benefits included in many plans, however, enrollees who would use services that were not covered by the available plans would face substantial increases in their out-of-pocket costs under the act.”

The AHCA bill is now in the hands of the Senate and it’s likely that the Senate version will differ from the House passed version. The Society will continue to monitor the legislations progress. If you would like to write your Senators about the AHCA to encourage them to work to achieve bipartisan consensus to improve access, coverage, and consumer protections for all Americans click here.