The Common Theme of Pending Senate Health Reform Bills? Dramatic Increases in the Number of Uninsured
As of this writing, multiple discussion drafts of potential legislation to repeal or rollback the federal Affordable Care Act (ACA) are pending in the U.S. Senate. All the bills result in dramatic increases in the number of uninsured over the next ten years; ranging from 22 million to 32 million depending on the proposal, according to analyses by the nonpartisan Congressional Budget Office (CBO).
Better Care Reconciliation Act (BCRA)
The BCRA, first introduced in June, among other things, eliminates financial penalties for individuals and employers that do not purchase coverage, reduces premium tax credits and eliminates cost-sharing reductions that help low and moderate income individuals purchase and access coverage, phases out the enhanced federal funding for the ACA expansion of Medicaid for low-income adults, and fundamentally alters the federal financial commitment to Medicaid by imposing a fixed formula, “per capita cap” model of reimbursing states for the program.
The July 13 version of the BCRA also included a new section typically referred to as the “Cruz amendment” because it was originally put forward by Senator Ted Cruz. The new section allows insurers to offer products that do not meet ACA standards, potentially with much lower benefits and fewer protections for individuals with pre-existing conditions. (See ITUP blog for details on the Cruz amendment.) Most experts believe that the Cruz amendment would result in segmenting the individual insurance market between younger, healthier individuals and those who are older or have health conditions that cause insurers to deny them coverage. Premiums would drop for those able to enroll in skimpier benefit plans and rise for those who need to remain in more comprehensive ACA-compliant benefit plans. (See ITUP BCRA summary here.)
CBO has not released an analysis of the impacts of the Cruz amendment, but found that other elements of the BCRA would leave 22 million Americans uninsured by 2026. (See latest CBO analysis of BCRA here.)
Obamacare Repeal Reconciliation Act (ORRA) of 2017
In recent days, Republican leadership released a new ACA repeal draft that includes no replacement elements, similar to a 2015 measure passed by Congress and vetoed by President Obama. ORRA repeals significant portions of the ACA in 2020, including the Medicaid adult expansion, ACA premium and cost sharing subsidies, and the penalties necessary to enforce the individual mandate. The approach in ORRA is sometimes referred to as “repeal and delay.” ORRA is predicated on the notion that Republicans would develop a replacement plan before the 2020 repeal date.
On July 19, the Congressional Budget Office (CBO) released its analysis of ORRA and found that in 2018, about 17 million more people would be uninsured under ORRA, reducing the percent of insured Americans from 90 percent under the ACA to 84 percent. By 2026, ORRA will strip coverage from 32 million individuals, leaving a historic high of 59 million Americans uninsured. In 2026, under ORRA, 21 percent of adults under age 65 will be uninsured.
Under ORRA, funding for the Medicaid adult expansion would be eliminated. The loss of federal Medicaid funds threatens coverage for 3.9 million California adults. In addition, 1.2 million of Covered California’s 1.4 million enrollees (87 percent) rely on ACA tax credits to help defray approximately 71 percent of overall premium costs. By eliminating these subsidies, as well as the cost sharing reductions that reduce out-of-pocket costs for 50 percent of Covered California enrollees, ORRA makes it likely that most, if not all, Covered California enrollees will lose coverage as well.
If fully implemented, ORRA could lead once again to more than 7 million uninsured in California.
Analyzing Impacts on Individual Coverage
In its most recent analysis of the BCRA, CBO includes extensive analysis on the potential impacts of reducing premium tax credits and changing the benchmark plan for premium tax credits from the current silver 70 percent actuarial value plan to a 58 percent actuarial value plan. CBO finds that premiums would initially increase (20 percent in 2018 and 10 percent in 2019) but then decrease as the level of benefits covered also decreases. In one example, CBO estimates that in 2026 a 40-year-old with income at 175 percent of the federal poverty level (FPL) would face a lower premium of $1,450 for the new benchmark plan than for an ACA silver level plan at $1,700, but that individual would pay much more in the form of cost sharing; 41 percent of the benefit costs versus 13 percent in a silver plan with cost-sharing reductions. Many individuals would overall pay more for the combination of premiums and cost-sharing than under the ACA.
CBO estimates that the deductibles under a 58 percent actuarial value plan would have to be approximately $13,000. In plans that offered some coverage before the deductible was satisfied, such as primary care visits or generic drug purchases, the deductible would have to be higher. This would mean that in 2026 deductibles alone would exceed the existing ACA limit on out-of-pocket costs (adjusted forward according to the current formula). Given such a high deductible, low income individuals would likely not purchase coverage. A $13,000 deductible would exceed the entire income of someone at 75 percent FPL, be equivalent to half of the income of someone at 175 percent FPL and equal one-quarter of the income of a person at 350 percent FPL.
Analyzing Market Impacts
Despite one stated aim of Republican efforts to repeal the ACA – addressing collapsing markets under the ACA — CBO has consistently found that the non-group (individual) insurance markets in most parts of the country are stable under the ACA.
To illustrate this point, according to Kaiser Family Foundation at the time of this post, only 38 U.S. counties out of 3,143 are at risk of having no insurer on the marketplace in 2018. Twenty-four thousand estimated enrollees out of 12 million (0.2 percent) are at risk of having no exchange insurer in 2018 (Kaiser Family Foundation updates this information regularly). In California, all California counties have at least two insurers and some counties have up to seven offerings through Covered California. California expects to have similar insurer participation in 2018.
By contrast, CBO projects that the loss of subsidies and other market changes in ORRA will destabilize the markets so that half the nation’s population will have no insurer participating in the individual market by 2020 and three-quarters of the nation will have no individual market insurer by 2026. CBO projects that by 2026, fewer than 2 million Americans will participate in the individual market nationwide, the approximate number insured in California’s individual market pre-ACA.
The CBO also estimates that under ORRA, because of reduced enrollment, higher average health care costs among remaining enrollees, and less participation by insurers, the average premium for silver plans in the individual market will increase by 25 percent in 2018 and be 50 percent higher in 2020 under ORRA. According to the CBO, premiums will continue increasing relative to premiums under the ACA and be 100 percent higher in 2026. For comparison purposes, average rate increases in California’s ACA marketplace, Covered California, for the past three years, has been 7 percent. Covered California rates increased, based on a weighted average, 13.2 percent in 2017.
What Comes Next
It remains unclear whether and in exactly what form the Senate will vote on ACA repeal legislation, although the leadership has promised a vote the last week of July. The Senate Parliamentarian also released the anticipated ruling concluding that many of the provisions of the BCRA violate the so-called “Byrd rule” limiting provisions that can be included in reconciliation bills.
What is clear is that the known proposals being considered by the Senate would drastically increase the number of uninsured, effectively erasing many of the coverage gains in California and around the country.