October 26, 2017

CBO: Bipartisan ACA bill would reduce deficits, stabilize premiums

Daily Briefing

    A bipartisan bill to bolster the Affordable Care Act's (ACA) exchange would cut the federal deficit by $3.8 billion from 2018 to 2027 without substantially changing premium rates or the number of people without insurance in 2018, according to a Congressional Budget Office (CBO) report released Wednesday.

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    The score came out the day after Senate Finance Committee Chair Orrin Hatch (R-Utah) and House Ways and Means Committee Chair Kevin Brady (R-Texas) proposed an alternative bill without Democratic support that would fund the ACA's cost-sharing reduction (CSR) payments and provide "relief" from the law's coverage mandates.

    Report findings

    For the report, CBO assumed the legislation would be enacted near the beginning of the 2018 calendar year. The report based its budgetary projections on CBO's June 2017 baseline.

    Funding for cost-sharing reduction payments through 2019

    CBO projected the cost-sharing reduction payments for insurers would total $18 billion for 2018 and 2019. CBO said those costs would not increase the federal deficit because they are already in the budget baseline.

    In fact, CBO predicted individuals and the government would see cost savings because many insurers raised premiums to account for the loss of the CSR payments. As a result, CBO projected that insurers would have to pay rebates totaling $3.1 billion from 2018 through 2027.

    While CBO said at this point it is too late for the CSR payments to have a real effect on 2018 premiums, the office projected premiums in 2019 would be lower with the payments than without them. CBO also projected the provision would not substantially change the number of people without insurance coverage in 2018, compared with the baseline.

    Expand eligibility for catastrophic health plans

    CBO projected that expanding eligibility for catastrophic health plans, which under the ACA are limited to individuals under age 30 or those experiencing financial hardships, to all consumers regardless of age or income "would not substantially change" the number of people purchasing plans on the individual market.

    However, CBO projected if the bill became law more young adults would enroll in those lower-cost plans, improving risk scores and lowering premiums for other individual health plans. Further, since individuals who enroll in catastrophic health plans under the ACA do not qualify for federal subsidies to help offset the cost of coverage, CBO projected the proposal from 2018 to 2027 would save about $1 billion in federal funding.

    Cost savings, unknowns

    Overall, CBO said the bill would lower the federal deficit by nearly $3.8 billion from 2018 to 2027.

    CBO said it was unable to determine a budgetary estimate for the bill's provision to increase federal outreach and enrollment assistance funding because it lacked "a basis for comparing the effects on enrollment and subsidies of using the funding for those activities to the effects of the funding choices under current law."

    Similarly, CBO said it could not estimate how the bill's provision to expand state flexibility under ACA's 1332 waiver process would affect the federal deficit because it cannot predict how states would choose to use that flexibility. However, CBO said it expects changes related to the waiver application process to increase the number of states that apply for waivers.

    Reaction

    In a joint statement, Sens. Lamar Alexander (R-Tenn.) and Patty Murray (D-Wash.) said, "This nonpartisan analysis shows that our bill provides savings and ensures that funding two years of cost-sharing payments will benefit taxpayers and low-income Americans, not insurance companies" (Cancryn, Politico, 10/25; Goldstein, Washington Post, 10/25; Meyer, Modern Healthcare, 10/25; CBO report, 10/25).

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