CBO Issues Cost Estimate of House-Passed Version of AHCA

On May 24, 2017, the Congressional Budget Office and Joint Committee on Taxation (collectively the CBO) released their cost estimate regarding the most recent version of the American Health Care Act (AHCA). As reported in the May 16, 2017, edition of Compliance Corner, the U.S. House of Representatives narrowly passed the AHCA, which represents the House Republicans’ attempt to repeal and replace the ACA.

According to the report, the AHCA would reduce the deficit by $119 billion over 10 years, $32 billion less in net savings compared to the previous version of the bill. Under prior scored versions of the bill, the CBO estimated that 24 million more people (by 2026) would be uninsured compared to estimates of those uninsured under the ACA. With the new amendments that ultimately led to passage in the House, the number of uninsured (as compared to ACA estimates) has been reduced to 23 million people (by 2026). It is noted that the increase in the uninsured (compared to the ACA estimates) would likely be disproportionately larger for older people and for lower-income Americans (due to increased premiums and reduced tax credits, respectively). Premiums following passage of the AHCA are projected to be somewhat lower in the individual market, but could become unaffordable for individuals with pre-existing conditions in some states. The majority of the impact of the AHCA’s passage would be felt by the individual market.

The $119 billion in projected deficit reduction is attributable to $1.1 trillion in savings offset by a reduction in revenues by $992 billion. The largest savings projected under the AHCA would come from cuts in Medicaid ($834 billion in savings over 10 years) and repeal of ACA’s tax credits ($665 billion savings over 10 years). The savings from the elimination of the ACA tax credits would be reduced by AHCA tax credits ($375 billion over 10 years) and AHCA funds dedicated to the Patient and State Stability Fund ($117 billion over 10 years). Elimination of the individual mandate and employer mandate penalties would reduce projected revenue by $210 billion, and repeal of certain taxes on wealthy individuals and corporations would reduce projected revenue by another $662 billion.

In conclusion, the CBO notes the uncertainty surrounding its estimates, particularly the unpredictability of which states would incorporate the waivers related to EHBs and community rating. As a reminder, the AHCA, if it becomes law, would allow flexibility for states to waive out of community rating and instead allow insurers to medically underwrite a policy for someone with a pre-existing condition following a lapse in coverage (rather than apply the 30-percent surcharge). In addition, due to the MacArthur amendment, the AHCA would allow states that receive a waiver to develop their own definition of EHBs. Even among those states that take advantage of the waivers, the resultant requirements (and ultimate cost) could vary widely from these projections. The CBO has attempted to develop estimates that lie in the middle of potential outcomes.

As we have stated before, it’s important to note that the status quo remains until the President signs the AHCA into law. Until that point, the ACA remains the law of the land. That means employers should continue their compliance efforts.

CBO report »