If enacted, Better Care Reconciliation Act of 2017 (H.R. 1628) (Better Care Act), a Senate bill, would reduce the federal deficit over the 2017 through 2026 period by $321 billion and would increase the number of uninsured by 22 million in 2026 relative to the number insured under current law, according to estimates released by the Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation (JCT). Under this bill, the largest budgetary effects would stem from provisions affecting insurance coverage, while the largest effects on spending would be for Medicaid. The estimated deficit reduction is $202 billion more than the estimated net savings for the House of Representatives version of H.R. 1628.
Federal budget. The CBO report indicated that the Senate bill would reduce direct spending by $1.022 billion and reduce revenues by $701 billion and projected deficits would be reduced by $862 billion over the 2017 – 2026 period and increased by $541 billion. The largest savings would come from reductions in outlays for Medicaid ($772 billion). CBO estimated that Medicaid spending would decline by 26 percent in 2026 ($160 million) when compared to the CBO projections under current law and changes to the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) and Health Care and Education Reconciliation Act of 2010 (HCERA) (P.L. 111-152) (together ACA), subsidies for nongroup health insurance. Savings, however, would be partially offset by other changes to the ACA insurance coverage provisions, including additional spending to reduce premiums (HCERA secs. 1401, 1402, 1415) and a reduction in revenues from repealing penalties on employers that do not offer insurance and people who do not purchase insurance (individual mandate, PPACA secs. 1501, 10106) ($210 billion).
The largest increases in deficits would come from repealing or modifying tax provisions in the ACA that are not directly related to health insurance coverage, including repealing a surtax on net investment income (HCERA sec. 1402) and repealing annual fees imposed on health insurers (PPACA secs. 9010, 10905).
Effect on health insurance coverage. The CBO report projected that 15 million more people would be uninsured under the Better Care Act than under the current law in 2018, primarily because the penalty for not having insurance would be repealed. The number of uninsured people would reach 19 million in 2020 and 22 million in 2026 and, in later years, other changes such as lower spending on Medicaid and substantially smaller average subsidies for coverage in the nongroup market would increase the number of uninsured people. By 2025, enrollment in Medicaid for individuals under 65 would fall to about 16 million and 49 million people would be uninsured (see PPACA sec. 1331, 2001, 10104) compared to 28 million who would be uninsured under current law.
Stability of the health insurance market. The CBO report noted that "the market for insurance purchased individually with premiums not based on one’s health status would be unstable if, for example, the people who wanted to buy coverage at any offered price would have average health care expenditures so high that offering the insurance would be unprofitable." Under current law, the subsidies to purchase coverage, combined with the effects of the individual mandate, are anticipated to cause sufficient demand for insurance by enough people, including people with low health care expenditures for the market to be stable in most areas, the CBO noted. However, a small number of people live in areas that have limited participation by insurers in the nongroup market and several factors may lead insurers to withdraw from the market.
Under the Better Care Act, nongroup insurance markets would continue to be stable in most parts of the country. Although uncertainty about the new law could lead some insurers to withdraw or not enter the market, several factors would bring market stability in most states before 2020, including subsidies to purchase insurance, appropriation of funds for cost-sharing subsidies, premium tax credits, and additional federal funding to lower premiums for people with high health care expenditures through 2021. CBO estimated that a small fraction of the population in certain sparsely populated areas would not have insurers participating in the nongroup market or insurance would only be offered with very high premiums.
Effects on premiums. CBO and JCT estimates indicated that average premiums in the nongroup would increase prior to 2020 and lower average premiums after 2020 relative to projections under current law. Under the Better Care Act, average premiums for benchmark plans for single individuals would be about 20 percent higher in 2018 than under current law mainly because the penalty for not having insurance would be eliminated. Those premiums would be about 10 percent higher than under the current law in 2019, less than in 2019, in part because funding provided by the Senate bill to reduce premiums would affect pricing and changes in the limits on how premiums can vary by age would result in a larger number of younger people paying lower premiums to purchase insurance.
Starting in 2020, the premium for a sliver plan would be a relatively high percentage of income for low-income people. The deductible also would be a significantly higher percentage of income. Despite being eligible for premium tax credits, few low-income people would purchase any plan, according to the CBO and JCT estimate. Under the Better Care Act, by 2026, average premiums for benchmark plans for single individuals in most of the country would be about 20 percent lower than under the current law. Some people enrolled in nongroup insurance would experience substantial increases in what they would spend on health care even though benchmark premiums would decline on average in 2020 and later years. CBO and JCT predicted that there would be higher out-of pocket spending under the Senate bill than under current law for close to half the population due to modifications of essential health benefits (PPACA secs. 1201, 1253, 1302) and elimination of the ACA’s ban on annual and lifetime limits (PPACA secs. 1001, 1004, 1562, 1563, 10106, 10107) on some covered benefits.
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