CBO scores 2 Republican healthcare bills

The Congressional Budget Office (CBO) has released reports on two Republican proposals regarding the Affordable Care Act: One which would repeal much of the law while delaying some of those effects for two years and another which replaces it with the Senate's Better Care Reconciliation Act (BCRA).

In the first analysis, the CBO said repealing the law without an immediate replacement would double premiums and increase the number of people without health insurance by 32 million by 2026. The CBO report is very similar to one released in January, before President Donald Trump took office when Republicans in Congress were considering reintroducing a 2015 bill which would repeal the ACA’s individual and employer health insurance mandates, eliminate the Medicaid expansion and roll back subsidies for buying insurance two years later, while keeping in place insurance regulations like required benefits and denying or pricing coverage based on pre-existing conditions.

Senate Majority Leader Mitch McConnell, R-Kentucky, revived this strategy after the second version of the Senate’s repeal-and-replace bill, the BCRA, was opposed by several Republicans. If the new repeal-and-delay plan, called the Obamacare Repeal Reconciliation Act (ORRA), was passed, the CBO said 17 million more people would be uninsured by 2018. This number would increase to 27 million after expanded Medicaid eligibility is eliminated by 2020, further increasing to 32 million by 2026.

In terms of market stability, the CBO said eliminating the individual and employer mandates, as well as subsidies for buying coverage would lead healthier customers to exit the individual market risk pool. The sicker enrollees who are left would be costly to cover, but leaving insurance regulations in place would mean insurers couldn’t return to pre-ACA strategies to offer fewer benefits or use medical underwriting to vary a sicker individual’s premium.

“After weighing the evidence from prior state-level reforms and input from experts and market participants, (CBO estimates) that about half of the nation’s population lives in areas that would have no insurer participating in the nongroup market in 2020, and the share would continue to increase, extending to about three-quarters of the population by 2026,” the report said. “That contraction of the market would most directly affect people without access to employment-based coverage or public health insurance.”

The repeal-and-delay strategy would bring a greater reduction to federal spending than the repeal-and-replace bills, shaving an estimated $473 billion off the federal budget deficit by $473 billion.

Less than a day later, the CBO released an updated analysis on the second version of BCRA. The impact on insurance coverage would the same as the first bill, with 22 million more people estimated to become uninsured by 2026. It would result in a greater reduction in federal spending than the first bill, cutting $420 billion from the federal deficit by 2026.

Unlike the repeal-and-delay strategy, premiums would be lower than under current law by 2020, according to the CBO, largely thanks to benchmark plans paying a smaller share of covered benefits after lowering actuarial value standards to 58 percent. Premiums would be higher for older customers, as the bill would allow those enrollees to be charged up to five time more than younger customers, rather than the ACA’s 3:1 ratio.

The actuarial value standard would create a problem with deductibles, which would rise at such a rate that it wouldn’t comply with current regulations. The CBO estimated those benchmark plans for a single policyholder would have a deductible of $13,000. However, the expected out-of-pocket limit under the current projections of national health expenditures would by $10,900—meaning either the formula would have to be adjusted or the $13,000 deductible plans wouldn’t be legal.

The high deductibles could also potentially price customers out of the insurance market based on their income related to the federal poverty level (FPL).

“Under this legislation, in 2026, that deductible would exceed the annual income of $11,400 for someone with income at 75 percent of the FPL. For people whose income was at 175 percent of the FPL ($26,500) and 375 percent of the FPL ($56,800), the deductible would constitute about a half and a quarter of their income, respectively,” the report said.

CBO’s analysis didn’t include the amendment supported by Sen. Ted Cruz, R-Texas, which would allow insurers to sell plans free of ACA regulations on required benefits and varying premiums based on health status as long as they also offer ACA-compliant plans in the same state. Insurers have said such a plan would turn the compliant plans into de facto high-risk pools, but an HHS analysis said it would lower premiums compared to the ACA.