Tax News Update    Email this document    Print this document  

June 26, 2017
2017-1018

CBO & JCT release estimate of Senate GOP health bill

Agencies say ACA repeal bill would increase uninsured population by 22 million by 2026, while reducing deficit by $321 billion; updated version of bill adds waiting period for those who let health coverage lapse

On June 26, 2017, the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) released their estimate of the budget effects of the Senate Republicans' bill to repeal to repeal and replace the 2010 Affordable Care Act (HR 1628). The Senate Budget Committee also released a revised version of the bill that added a six-month waiting period for health coverage for people who were not continuously insured during the previous year.

Attached with this Alert, please find PDFs of the revised text of the bill (145 pages), the CBO score document (49 pages) and a JCT revenue table.

CBO estimate

The estimate released by the CBO and the staff of the JCT predicted that enacting the bill would reduce the federal budget deficit over the 2017-2026 period by a net $321 billion. That figure is $202 billion more than the estimated net savings for the version of HR 1628 passed by the House in May. CBO and JCT also found that the bill "would increase the number of people who are uninsured by 22 million in 2026 relative to the number under current law" — slightly fewer than they had estimated for the House bill. "By 2026, an estimated 49 million people would be uninsured, compared with 28 million who would lack insurance that year under current law."

In the shorter term, the estimate said that 15 million more people would be uninsured under the Better Care Reconciliation Act in 2018 than under current law, "primarily because the penalty for not having insurance would be eliminated. The increase in the number of uninsured people relative to the number projected under current law would reach 19 million in 2020 and 22 million in 2026." In later years, other changes, such as lower levels of Medicaid spending and smaller subsidies for coverage in the non-group market, would increase the uninsured population. "By 2026, among people under age 65, enrollment in Medicaid would fall by about 16% and an estimated 49 million people would be uninsured, compared with 28 million who would lack insurance that year under current law," the estimate says.

CBO and JCT estimated that the bill's largest budget savings would come from reductions in Medicaid outlays — spending on the program would decline in 2026 by 26% compared with what CBO projects under current law — and from changes to the ACA's subsidies for non-group health insurance. The largest deficit increases 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 and repealing annual fees imposed on health insurers."

CBO and JCT also estimated that individual health insurance markets "would continue to be stable in most parts of the country. Although substantial uncertainty about the effects of the new law could lead some insurers to withdraw from or not enter the non-group market in some states, several factors would bring about market stability in most states before 2020 … . those key factors include the following:

— [S]ubsidies to purchase insurance, which would maintain sufficient demand for insurance by people with low health care expenditures

— [T]he appropriation of funds for cost-sharing subsidies, which would provide certainty about the availability of those funds

— [A]dditional federal funding provided to states and insurers, which would lower premiums by reducing the costs to insurers of people with high health care expenditures"

Revisions to bill

The substitute amendment released June 26 adds language that would impose a six-month waiting period before new insurance could take effect for anyone who has had a lapse in coverage of 63 days or longer during the prior year. The provision is intended to encourage people to maintain continuous coverage in the absence of the ACA's mandate penalties requiring individuals to buy insurance, which the bill would zero out. Without such a penalty, insurers have warned that health care markets could become unstable because insurers would still be barred from turning away individuals with pre-existing conditions who did not seek coverage until they required care. The penalty would take effect in 2019 and apply only to those in the individual market.

The updated bill also includes new language aligning the bill's four-year, $50 billion stabilization fund with the Children's Health Insurance Program (CHIP) in an effort to preserve "Hyde amendment" restrictions on using federal funds for abortion. Experts had speculated that the bill's language explicitly extending Hyde restrictions to the reinsurance fund could be struck by the Byrd rule.

Senate Republicans are expected to make additional changes to the bill this week as leadership continues to try to secure the necessary 50 votes from wavering senators. Notably, Senate Majority Whip John Cornyn (R-TX) tweeted that he no longer believes the chamber has until August 1 to finish the legislation. "I am closing the door. We need to do it this week before double-digit premium increases are announced for next year," Cornyn said.

———————————————

Contact Information
For additional information concerning this Alert, please contact:
 
Washington Council Ernst & Young
   • Any member of the group, at (202) 293-7474;.

———————————————
ATTACHMENTS

Better Care Reconciliation Act of 2017

CBO Cost Estimate

Estimated revenue effects