Tonight the Congressional Budget Office issued their updated score for the American Health Care Act of 2017, after taking into account four manager’s amendments. In terms of the number of uninsured, nothing changed. According to the CBO, 24 million fewer people will be insured in 2026 than they had estimated in March 2016. See our note from March 14 for the breakdown on that.
In terms of deficit reduction, the number was cut in about half. Instead of the $323 billion in deficit reduction as a result of the original bill, the CBO now estimates that the deficit will be reduced by $150 billion. Not exactly a number that will get conservatives excited.
However, with their insistence that repeal of the ACA include repeal of insurance market mandates, most particularly the Essential Health Benefits, House conservatives may be on to a winning strategy.
The reason the CBO estimate of the uninsured is high and hasn’t budged rests with how the CBO defines insurance. According to a blog post from December of last year, titled “How Does CBO Define and Estimate Health Insurance Coverage for People Under 65?,” the CBO defines private health insurance coverage broadly as “a comprehensive major medical policy that, as a minimum, covers high-cost medical events and various services, including those provided by physicians and hospitals.”
That definition excludes health insurance policies with limited benefits like policies that only cover certain diseases, fixed dollar indemnity plans and single-service plans like vision and dental.
Reasonable enough.
Here is the thorn in Republican’s side: the CBO says that “[w]hen specific requirements are established in law, the CBO relies on those definitions to further determine what policies count as private insurance.”
Now, the ACA is the mother of all insurance mandates. It has requirements about maximum annual and lifetime limits, a strict age ratio of 3:1, community rating, requirements that each plan include Essential Health Benefits, and other provisions. The CBO, under its policy framework, is estimating how repeal of the ACA will affect health insurance coverage while using the definition of health insurance coverage in the ACA. Got that?
It is worth reading exactly what they have to say about it:
When specific requirements are established in law, CBO relies on those definitions to further determine what policies count as private insurance coverage. To define coverage under the ACA, CBO relies on provisions in that law that established detailed requirements governing the benefits of private insurance coverage in the large-group market, which is generally defined as employers with more than 50 employees.
CBO also relies on separate provisions of the ACA that define the requirements governing plans offered in the small-group (generally defined as employers with up to 50 employees) and nongroup markets. Since 2014, new plans sold in those markets must cover 10 categories of health benefits that the ACA defines as essential. Other provisions require that the actuarial value (a summary measure of the depth of coverage) of those plans fall into specified categories (60 percent, 70 percent, 80 percent and 90 percent actuarial value). Only in limited circumstances may plans with an actuarial value of less than 60 percent—known as catastrophic plans—be sold to certain individuals.
In short, if the definition of what constitutes health insurance were to change, then the CBO would change how it estimates coverage when scoring bills like the AHCA.
Don’t take my word for it. Here is what they wrote in December:
If the provisions of the ACA governing the definition of private insurance coverage were repealed, CBO would revert to the broader definition of private insurance coverage—a comprehensive major medical policy, as described above. Such a broad definition of private insurance coverage is in keeping with what the agency has used to estimate coverage in the past.
As we discussed in a note earlier today, conservative House Republicans are basically taking the CBOs advice. The AHCA already includes a provision to eliminate required actuarial value of health insurance plans and relaxing the age ratio.
Additionally, the Freedom Caucus and others have been advocating for elimination of the Essential Health Benefits which has been the main driver of health insurance premium increases and identified by the National Association of Insurance Commissioners and America’s Health Insurance Plans as critical to bringing down the cost of insurance.
If the Freedom Caucus is successful in including repeal of the EHBs and other mandates like community rating in the AHCA, the CBO’s next score would revert to the broad definition they used before enactment of the ACA. The current increase in the uninsured of 24 million from the baseline would, then drop.
The CBO’s most recent estimate suggests that there will be 10 million fewer people insured in the individual and employer-based system than their March 2016 estimate. Certainly not all of these uninsured would disappear but a good many of them will as the insurance markets are again allowed to compete on benefit design to at least some degree.
That result would make House and Senate moderates pretty happy.
Call with questions though I imagine you might be tired of hearing from me today.
Emily Evans
Managing Director
Health Policy
@HedgeyeEEvans
