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CBO Reviews the American Health Care Act

Last week we provided an overview of the proposed American Health Care Act (AHCA) intended to repeal and replace the Affordable Care Act (ACA). On March 13, the Congressional Budget Office (CBO) and the Joint Committee on Taxation released their cost analysis of this legislation.  Keep in mind this is beginning of the legislative process and revisions could/will occur. Here are a few of their findings:


Federal Deficit

By ending the ACA’s expanded funding for Medicaid and replacing individual subsidies with the Patient and State Stability Fund, the CBO estimates that health programs for low-income Americans will decrease by $880 billion over the next decade. This would cut $935 billion from the federal deficit.

However, because the AHCA seeks to repeal Pay or Play taxes, the CBO says revenue is expected to decline by $599 billion dollars offsetting this federal deficit reduction. Therefore, the overall projected reduction in the deficit would be $337 billion by 2026.



Uninsured Americans

The CBO estimates that the proposed AHCA will result in 14 million people going without insurance in 2018. “Some of those people would choose not to have insurance because they chose to be covered by insurance under current law only to avoid paying the penalties, and some people would forgo insurance in response to higher premiums,” the report concludes.

That number increases by 2026 to 52 million Americans (compared to 28 million who would be uninsured if the ACA continued). Half of those 52 million would be uninsured because they will no longer be eligible for Medicare.



Health insurance premiums are projected to be 10-20% higher in 2018 through 2019. The estimated hike is a reflection of the elimination of the Pay or Play individual mandate, as healthy people are more likely to drop coverage, driving up risk. Although there is an initial rise in premium, a 10% reduction is forecasted in 10 years as compared to the ACA.

As mentioned in last week’s report, the AHCA aims to allow health insurance companies to charge older Americans higher premiums than younger people. The current law allows a 3-to-1 ratio. Under AHCA, it would be 5-to-1.


What happens next?

The House Budget Committee approved the AHCA bill on March 16, 2017. Now the bill moves onto the Senate. With the release of the CBO’s report, some Senate legislators are not fully on board with the AHCA bill in its current state. Changes to the bill are expected.

National Insurance Services will continue to keep you abreast of all future developments. Download to read the CBO’s full report.

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Erin Woulfe
Erin Woulfe
Erin Woulfe likes to write about things that matter. Keeping her finger on the pulse of what’s happening in the public sector world, she blogs about the latest legislative news and employee benefit trends that affect our school, city and county clients. She’s been with NIS since 2002. “I love connecting to our clients and providing them with the tools they need in order to administrate their plan,” says Erin. “Whether that be materials to educate their employees on certain benefits, how to effectively communicate change within an organization or just providing tips and how-to’s to help them make their job easier.”


  1. Becky Schermer says:

    How will this affect employers and ACA reporting? In particular, having the ability to allow part-time employees work more than 30 hours per week?

    • Carolyn Wonders says:

      Hi Becky, Thanks for your question. I’m not sure if there is any information out there on this yet, but I will check with our consultants to see if I can get you a better answer. Stay tuned!

    • Erik Kass says:

      The American Health Care Act is proposed legislation; it is not certain whether or not it will be enacted. In addition, if it is enacted, there is no guarantee that the final Act will be the same as the Act’s current form. The following is information based upon what we know right now, and is subject to change as the Act continues through the legislative process.

      The proposed legislation would reduce the penalties imposed under both the employer mandate (pay or play) and the individual mandate to zero, effectively repealing both mandates (although they would technically still exist). These changes would apply retroactively for months beginning after Dec. 31, 2015.

      This would mean the penalty for an ALE not offering coverage to “full-time” employees as defined under the ACA, would be zero.

      However, there may still be employer reporting obligations, but not for the purpose of determining potential penalties for the employer. Rather, employers may need to report on whether employees had coverage for purposes of the tax credits that are included in the proposed legislation (that replace the ACA’s subsidies).

      Hope this helps answer your question!

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