American Health Care Act: Who Would Lose Coverage?

CBO says 23 million people would lose coverage under the AHCA. Who are they?

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In January 2017, Congress passed a budget resolution instructing congressional committees to draft reconciliation legislation to repeal spending-related aspects of the Affordable Care Act (ACA, also commonly referred to as Obamacare). That process culminated on March 6, when two House committees (Ways and Means, and Energy and Commerce) unveiled legislation that is collectively titled the American Health Care Act (AHCA). The bill was formally introduced in the House on March 20.

After a rocky trip through the legislative process, the AHCA passed the House on May 4, by a vote of 217 to 213. It needed 216 to pass, so it was a very narrow win. Democrats were unified in their opposition to the bill, and 20 Republican representatives joined them in voting against the measure.

The AHCA is a shorter, much less complex piece of legislation than the ACA, but that's because it's a reconciliation bill that can only address things that directly impact the federal budget. Reconciliation bills are filibuster-proof, so they can pass in the Senate with a simple majority, instead of needing 60 votes. But they're much more limited in scope than legislation that's subject to filibuster.

The Kaiser Family Foundation has an excellent summary of the AHCA, along with a tool that will let you compare the AHCA with the ACA, and with other recently introduced legislation.

Congressional Budget Office Scores the Bill

On March 13, the Congressional Budget Office (CBO) released their initial analysis of the AHCA, estimating that enactment of the law would increase the number of uninsured people in the U.S. by 24 million over the next decade.

The CBO is a nonpartisan office tasked with sorting out the math that goes along with pieces of legislation. Republican lawmakers worked to discredit the CBO in the days following the introduction of the AHCA, but without the CBO's input, there's really no way to legitimately estimate the numerical impact of a bill, since estimates from lawmakers and their staff would likely be tinged by political bias.

By the time the CBO score became available, the AHCA had already passed the House Ways and Means Committee and the House Energy and Commerce Committee; both committees had passed the bill without any information from the CBO. The House Budget Committee's hearing on the AHCA came two days after the CBO scoring was published, so the issue of how many people would lose coverage was part of the discussion in that committee.

On March 23, the CBO scored the AHCA again to reflect an amendment that had been added, but three additional amendments were added in April and May (these are described below in more detail). Because of the rapid push to get to a vote, the House did not wait for the CBO to score the final bill before voting on it. 

Ultimately, the CBO score on the final House version of the AHCA was published on May 24, nearly three weeks after the House had passed the legislation. The two earlier scores had projected that the number of uninsured Americans would grow by 24 million people over the next decade. After incorporating the three amendments that were added in April and May, the CBO projected that the number of uninsured Americans would increase by 23 million people over the coming decade. 

So the amendments that were added in April and May changed the overall projection by 1 million people (23 million fewer people with insurance by 2026, as opposed to 24 million). This is due to a projection that 4 million more people will have employer-sponsored coverage by 2026 under the latest version of the AHCA (as opposed to the earlier version of the bill), but that 3 million fewer people will have individual market coverage.

The CBO projects that more people will have employer-sponsored coverage under the most recent version of the AHCA specifically because they expect the coverage options in the individual market to decline in quality in states that seek AHCA (MacArthur Amendment) waivers from the ACA's consumer protections. As a result, they believe that more employers will offer group coverage to their employees, since employees' options in the non-group market will be of poor quality (in states that seek waiver, for example, maternity coverage might no longer be a standard benefit on individual market plans, and the CBO projects that a maternity rider might cost more than $1,000/month). 

23 Million Losing Coverage: Who and Why?

The final CBO analysis of the AHCA is 41 pages long, and it delves into a variety of subjects, including the impact the bill would have on health insurance premiums, market stability, and the federal budget. But let's focus on the projection that 23 million people would lose coverage over the next decade. Who are those people, and why would they lose coverage?

Health policy experts repeatedly said that millions of people would lose coverage under the AHCA, and that the amendments added to win support in the House would not improve the overall impact of the bill. In response, House Speaker Paul Ryan (R, Wisconsin) said that of course, fewer people would have coverage when there's no longer a government mandate requiring people to have coverage. When pressed in terms of how many more uninsured people there would be under the AHCA, Ryan explained that "it's up to the people," indicating that coverage losses would be voluntary (ie, people would choose to go without coverage once the individual mandate is eliminated).

This is certainly true, for some people. But a lot of coverage losses under the AHCA would happen when insurance becomes unaffordable.

Here's a rough breakdown of who's projected to become uninsured, and why:

In 2017, 4 Million People Due to Elimination of the Individual Mandate Penalty

The AHCA would eliminate the individual mandate penalty, retroactive to the start of 2016. As a result, the CBO projects that 1 million people (all with coverage in the individual market, including the exchanges) would drop their 2017 coverage mid-year, if and when the legislation is enacted. 

By 2018, 14 Million Due to Higher Premiums and Penalty Elimination

By 2018, the increase in the number of uninsured people (relative to continuing the ACA) would grow to 14 million, and by 2012, it would grow to 19 million. The CBO notes that the majority of these individuals would drop coverage because there would be no mandate requiring them to have it, but in many cases, their "voluntary" switch to being uninsured would come about due to premium increases.

This would be particularly true in 2020 and beyond, when the AHCA's tax credits would replace the ACA's tax credits (AHCA tax credits will be smaller for most individuals, particularly for low-income enrollees who are the least likely to be able to bear the brunt of the ensuing net premium increase).

The CBO predicts that in states that seek waivers to allow plans to be sold without covering all of the ACA's essential health benefits, and to allow individual market insurers to base premiums on medical history when applicants have a gap in coverage, premiums could become entirely unaffordable for people with pre-existing conditions and a gap in coverage. 

By 2021, 21 Million People: Medicaid Expansion Freeze Plays a Large Role

Starting in 2021, the number of people losing Medicaid surpasses the reduction in the number of people with individual market coverage. From that point onward, the reduction in the number of people with Medicaid is by far the largest component in the overall drop in the number of people with health coverage.

That's because the AHCA freezes the ACA's Medicaid expansion starting in 2020. From that point on, expanded Medicaid enrollment would cease, which means childless adults with income up to 138 percent of the poverty level would no longer be able to enroll in Medicaid funded mostly by the federal government.

People who are already enrolled in expanded Medicaid at that point would remain covered, but if their income increased above 138 percent of the poverty level, triggering a loss of eligibility for Medicaid, they would not be able to re-enroll in Medicaid later on, even if their income dropped again.

Under current ACA rules, people who are eligible for Medicaid can enroll at any time, and there's a significant amount of "churn" in the Medicaid expansion population. For example, a seasonal worker who has income that fluctuates significantly during the year might be Medicaid-eligible for part of the year. That sort of switching back and forth from expanded Medicaid to employer-sponsored or individual market coverage would no longer be allowed under the AHCA as of 2020.

Over time, the reduction in the number of people with employer-sponsored coverage would also grow, due to people choosing not to enroll (because there wouldn't be an individual mandate penalty) and also due to employers choosing not to offer coverage (because there wouldn't be an employer mandate penalty). Most employers would likely continue to offer coverage, however, as doing so is a good way to attract and retain a high-quality workforce. And the May CBO score indicates a drop of only 3 million people covered by employer-sponsored plans as of 2026—as opposed to a drop of 7 million that had been projected in their previous analysis of the bill.

By 2025, 23 Million, Remaining At That Level Through 2026

The CBO projects that by 2025, there would be 23 million more uninsured people in the U.S. than there would be if the ACA were to remain in place. This remains the case through 2026, which is the end point of the current projection.

In addition to the factors discussed above, the AHCA would also convert federal Medicaid funding to a per-capita allotment or block grant, starting in 2020. That's in contrast to the current open-ended federal matching provided today. The result would be cost savings for the federal government, but less Medicaid money for states as time goes by. To compensate, states would have the option to spend more of their own money on Medicaid, but many would be forced to limit eligibility in order to curtail costs.

AHCA Initially Failed, But Was Revived and Passed by the House

All Democratic lawmakers have been opposed to the AHCA from the start, and numerous Republican lawmakers have also expressed concerns about the legislation. That includes moderate Republicans who are worried about Medicaid changes leaving their constituents without access to affordable coverage, and it also includes far-right Republicans, including the House Freedom Caucus, who would prefer a bill that entirely eliminates the ACA.

During the House Budget Committee hearing for the AHCA, which happened after the CBO score was published, Representative Tom McClintock (R, California) noted that changes needed to be made to the AHCA's tax credits in order to keep coverage affordable for lower-income enrollees (currently the bill calls for flat tax credits for people with income up to $75,000, which means that a person earning $20,000 would get the same assistance as a person earning $70,000).

And on March 19, Speaker Ryan said that the AHCA's tax credits needed to be adjusted to make coverage more affordable for people in their 50s and 60s. The AHCA already calls for larger tax credits for older enrollees, but the law also allows insurers to charge older enrollees five times as much as younger enrollees (as opposed to the current 3:1 ratio), and the currently proposed tax credits would not be enough to keep coverage affordable for people in their 50s and 60s with low and middle incomes.

The Manager's Amendment that was added to the AHCA on March 20 was an effort to get more lawmakers on board, and further changes were made at the last minute in the lead-up to a vote that was initially scheduled for March 23 and then postponed until March 24. It wasn't enough, however, and after four hours of debate on the House floor on March 24, the bill was pulled minutes before the vote.

Soon after, Speaker Ryan gave a press conference during which he said that the ACA would remain in effect for the foreseeable future, and that Republican lawmakers would move on to other items on their agenda.

That sentiment was short-lived, however, and by the first week in April, the legislation was back on the table and under negotiation. But there was a significant impasse between the House Freedom Caucus and moderate Republicans.

The Freedom Caucus wants to allow states to eliminate the ACA's essential health benefits requirements, and allow insurers to charge sick enrollees more than healthy enrollees (that was common before the ACA, but the ACA banned that practice, allowing rates to vary only based on age, zip code, and tobacco use). Moderate Republicans, on the other hand, worry that allowing insurers to charge more for sick applicants would essentially eliminate the ACA's protections for people with pre-existing conditions, which is one of the most popular provisions of the ACA.

Three Amendments That Were Included in the Third CBO Score

On April 6, House Republicans introduced an amendment to the AHCA (explained in further detail here). The amendment would appropriate $15 billion in federal funding over nine years (2018 through 2026) for an "invisible risk sharing program." The amendment is only four pages long and leaves most of the details up to CMS regulations that would be promulgated at a later date.

But essentially, it would have the federal government pick up very high-cost claims in an effort to reduce overall premiums. People with high-cost claims would remain covered by the same insurance plans as everyone else (as opposed to being relegated to separate high-risk pools), but the federal government would be taking some of the strain off the insurance carriers when members needed extensive treatment. Hence the "invisible" part, as members wouldn't see any differences in terms of their coverage or how their claims are processed.

Later in April, the MacArthur Amendment was introduced in an effort to win votes from the House Freedom Caucus. That tactic worked, and the Freedom Caucus supported the AHCA after the MacArther Amendment was added. The Amendment gives states the option to waive some of the ACA's consumer protections. In states that seek a waiver,

    Another amendment, the Upton Amendment, was added to the AHCA on May 3, the evening before the vote in the House. The Upton Amendment was a response to concerns that the MacArthur Amendment would gut protections for people with pre-existing conditions.

    It provides $8 billion over five years for waiver states to use to offset the higher costs that would be borne by people with pre-existing conditions who experience a gap in coverage and need to purchase a plan in the individual market. This appeased moderate Republicans enough for the AHCA to pass in the House, but there are ongoing concerns that the amount of money is far too low to provide adequate protections for people with pre-existing conditions (the CBO confirmed in their May analysis that $8 billion will be insufficient funding).

    The CBO had not finished scoring the three new amendments by the time the House voted on the AHCA. This was not surprising, given that the Upton Amendment was added just hours before the vote. But the expectation was that the amended AHCA would still result in a dramatic spike in the uninsured rate, from its current all-time low.

    Sure enough, the CBO projects that the amended version of the AHCA will result in 51 million uninsured people by 2026, as opposed to 28 million if we continue with the ACA.

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