Posted on Tuesday, May 30th, 2017
Despite the feverish pace of legislative efforts in Washington, the team at Landmark Benefits has been closely monitoring the progress of that American Health Care Act (AHCA).
The Congressional Budget Office (CBO) released their highly anticipated updated report on the American Health Care Act (AHCA) on Wednesday, showing that the bill would save the government $119 billion BUT that an additional 23 million would be uninsured to bring a total of 51 million Americans without insurance. This amounts to a net increase of 3 million additional uninsured from before the ACA was signed into law, when 48 million didn’t have coverage.
Our question at Landmark Benefits is, “can’t we do better?” Of the 51 million to be uninsured, most would prefer to have access to an “affordable” health insurance plan. Ultimately, the reason for health insurance to be so expensive is simply the continued escalating cost in the health care services. Shouldn’t Congress start to focus on health care costs, which represents 85% of the premium dollar?
The previous score from the CBO, which was released in March, projected that the bill would save the government $150 billion (revised down from an initial savings of $337 billion) and would lead to 24 million newly uninsured. The CBO is the nonpartisan group tasked with determining the cost of legislation to the federal government, both in a loss of revenue and increase in spending.
The updated report was necessitated by the adoption of several amendments to the AHCA from the last time the bill had been scored. The most prominent of these was the amendment offered by Representative Tom MacArthur (R-NJ) to allow states to receive a waiver to opt out of the ACA’s essential health benefits and age and community rating provisions. As a result, States could propose the following:
- Increase the State’s age-rating bands. The state must specify a higher age-rating band, generally defaulted at 5:1 under other sections of the AHCA, although states could opt for higher ratios.
- Establish State-based requirements for essential health benefits (EHBs) in the individual and small group markets beginning in 2020. The State must precisely specify both the benefit categories and the specific benefits within the categories. This could include overriding the ACA’s prohibitions of lifetime and annual limits and cap on out-of-pocket expenditures, which could also be applied to large group and self-insured employer plans.
- Permit insurers to price policies based on health status. This substitutes the AHCA’s original continuous coverage incentive’s late-enrollment penalty to allow insurers to charge higher premiums for consumers who do not maintain continuous coverage (defined as a lapse of 63 days+ over 12 months). It is important to note that the amendment would not allow states to automatically rate up consumers with pre-existing conditions. The amendment only allows for insurers to underwrite consumers with pre-existing conditions if they do not have continuous coverage in states where a waiver has met all conditions to be approved.
The reduced revenue is largely due to repealing the majority of the ACA’s taxes (a loss of $664 billion in revenue):
- $275 billion: eliminating the net investment tax
- $145 billion: eliminating the health insurance tax (HIT)
- $49 billion: elimination of the Cadillac Tax
- Remainder: Unrelated to health coverage proposals.
Revenue would further be reduced by effectively eliminating the ACA’s individual and employer mandates by reducing those penalties to $0, although they would still statutorily exist. The employer mandate makes up most of this at $171 billion, while individual penalties would result in $38 billion in lost revenue.
The biggest cause of the increase in the uninsured rate is due to the elimination of these penalties. As with the previous report, the new report estimates that 14 million Americans would become newly uninsured next year under the AHCA, gradually increasing to 23 million for a total of 51 uninsured by 2026. The AHCA as amended would not result in as many individuals losing employer-sponsored insurance (ESI) as previously estimated. The CBO projects that there would be 1 million fewer people enrolled in ESI in 2020 (compared to 2 million in the previous estimate) and by 2026 there would be 3 million fewer enrolled in ESI, compared to 7 million as previously projected. The revised estimates are largely due to individual health insurance being far less comprehensive and individuals opting to enroll in employer coverage instead to avoid higher out-of-pocket expenses.
Landmark Benefits will continue to monitor the progress of the AHCA as it moves through Congress. Please send any inquiries to your account manager.