CMS actuary: AHCA could cause individual market to collapse

A report from CMS Chief Actuary Paul Spitalnic estimated 13 million fewer people will have insurance coverage under the House-passed version of the American Health Care Act (AHCA), a markedly lower figure than the 23 million predicted by the Congressional Budget Office (CBO).

In other areas, the two reports were in agreement. Like the CBO report, Spitalnic said the Affordable Care Act (ACA) replacement plan could damage the individual insurance market if states waive essential health benefits (EHB) and community rating provisions from the ACA.

“Certain waivers could be granted under the AHCA that would result in a deteriorating or possibly failing individual market,” Spitalnic wrote in his report. “Our estimates do not reflect the implementation of waivers that would severely limit the EHB package or allow healthy individuals to be underwritten on an annual basis. If such actions were implemented, we would expect that the individual market in these areas would destabilize such that the premiums for comprehensive coverage for a significant proportion of the population would become unaffordable and the coverage would cease to be offered.”

The report assumed about 25 percent of states would apply for waivers in both areas. The less-generous coverage (an average of 62 percent of actuarial value versus 69 percent under the ACA) would result in lower net premiums by an average of 10 percent by 2020. By 2026, however, the report estimated the average net premiums would go up by 5 percent, with the AHCA’s subsidies not increasing at the same rate as premium costs and extra funding to cover patients with pre-existing conditions having been depleted.

The report also warned that a far greater amount of funding would be needed for protections like high-risk pool if a greater number of states opt for waivers on benefits and community rating.

Among the other findings in the report:

• The AHCA would reduce federal spending by $328 billion by 2026 (the CBO had estimated $119 billion)
• Approximately 13 million more people would be uninsured (lower than the 23 million estimated by the CBO), mostly thanks to Medicaid enrollment being lowered by eight million, reducing subsidies for individual market customers and repealing the individual mandate
• Cost-sharing would be 61 percent higher than under the ACA
• The Medicare Hospital Insurance (HI) trust fund would be depleted by 2026, two years earlier than under current law, thanks to eliminating the HI tax on high-income earners and CMS paying out more in Medicare disproportionate share hospital (DSH) payments
• Between 2017 and 2016, total national health spending would be $258 billion, or 0.6 percent lower under the AHCA. State and local governments would have to finance $37 billion in health spending, an increase of 0.5 percent, while federal financing would decline by 1.9 percent to $253 billion