The potential impact of the Republican ACA replacement

Health policy analyses predict 15 million people could lose their health coverage and 30 million could be subject to surcharges on top of premiums if the Republican-sponsored American Health Care Act (AHCA) goes into effect.

The Brookings Institute tried to estimate what the Congressional Budget Office (CBO) is expected to outline in its official report on the legislation. Written by University of Southern California Schaeffer Center for Health Policy & Economics fellows Loren Adler and Matthew Fiedler, the report said uncertainty exists about the total number of people who will become uninsured if the bill is enacted.

Repealing the Affordable Care Act (ACA)’s individual mandate alone would likely lead to 15 million fewer people being covered by 2026, with millions more losing coverage by rolling back Medicaid expansion and implementing a per-capita cap on federal Medicaid funds to states.  

“The precise coverage impacts of the legislation’s changes to the structure of individual market subsidies are uncertain, but our view is that the CBO will most likely conclude that these provisions result in a reduction in individual market coverage that adds to the coverage losses caused by repeal of the individual mandate,” Adler and Fiedler wrote.

The report said predicting the impact of the AHCA’s changes to the ACA’s subsidies for buying health insurance, basing them primarily on age rather than income and geographical location, is more difficult. The strategy could lead to increasing “efficiency of the subsidy dollars in increasing the number of people with coverage,” and lead to more people with very low net premiums. However, the effect on higher-cost areas could be close to catastrophic.

“CBO stated in its estimates of so-called ‘repeal and delay’ legislation that fully eliminating subsidies would risk a near-complete unraveling of the individual market as healthy individuals dropped coverage, driving premium increases that spurred still larger coverage losses,” Adler and Fiedler wrote. “In some high-cost areas, the magnitude of the loss in subsidies would be very large in proportional terms, raising a similar prospect of substantial unraveling in these markets.”

The AHCA’s attempt at replacing the individual mandate with a mechanism penalizing people for not having health insurance is a surcharge for those without continuous coverage. If a customer went 63 days or more without insurance in the prior year, the insurer can collect a 30 percent payment on top of the premium for the next 12 months, regardless of how long the customer went without coverage.

According to Commonwealth Fund researchers Sara Collins and Munira Gunja, 30 million people buying coverage on the individual or small group markets in 2016 would’ve been subject to this penalty—44 percent of those would’ve been 19- to 34-year-olds, a coveted demographic to shore up the risk pool in the ACA exchanges.

With the AHCA’s changes to the age-band ratio, allowing insurers to charge older customers up to five times as much as younger ones, older customers with an insurance gap would have to pay significantly more.

“For example, a 30-year-old with a gap in coverage of longer than 63 days in the past 12 months would face a surcharge of $84 per month for the next 12 months, for a total of $1,007. In contrast, a 50-year-old with a gap in coverage of the same length would be charged $96 more than a younger person per month, or $1,154 more over 12 months, for a total of $2,161,” Collins and Gunja wrote.

This would require larger payments from a greater number of people than the ACA’s individual mandate penalty. In 2015, 6.5 million people paid that fine, which is capped at about $58 per month, up to $695 a year, or 2.5 percent of income (whichever is higher, up to a maximum equal to the national average bronze plan premium).

The cumulative effect, the report said, would be a “strong disincentive” for customers with insurance gaps to re-enroll, leading to higher premiums and a sicker risk pool.

“In sum, the ACA penalizes individuals who remain uncovered; the AHCA penalizes them when they try to get covered,” Collins and Gunja concluded.

The CBO’s own report on the AHCA is expected as early as March 13, ahead of any vote by the full House of Representatives.