The proposed replacement for the Affordable Care Act (ACA) will leave millions of people without health insurance and make coverage skimpier for those who still have it. That’s according to the Congressional Budget Office, which just issued its highly anticipated report on that plan.
The House of Representatives passed the replacement bill, called the American Health Care Act, on May 4 without giving the nonpartisan economists at the budget office a chance to look at it. Their analysis is grim news if you have a pre-existing condition or don’t have a lot of money. Here are six key points from the new report:
1. Fewer people will have health insurance—23 million fewer. The budget office expects 51 million Americans to be uninsured by 2026 under the replacement plan, versus 28 million if the ACA stays in place. The largest group to be thrown off insurance will be the 14 million people who would have had coverage through the ACA’s expanded Medicaid program. The rest will be people who can no longer afford coverage on the individual market.
2. Nearly 90 percent of the funding will disappear for Medicaid expansion and premium subsidies to help people buy private insurance. Over the next 10 years, that includes $834 billion in cuts in Medicaid spending, and a net reduction of $276 billion in premium subsidies.
Offsetting that is only $138 billion in new spending to help states stabilize premiums and offer a bit of help to people with pre-existing conditions. The replacement plan would reduce the U.S. deficit by $119 billion, with most of the savings going toward eliminating the ACA’s taxes on high-income investors and health care companies.
3. The new subsidy formula will make insurance unaffordable for lower-income consumers. The ACA now protects low- and moderate-income consumers from high premiums by capping the percentage of their income they’re expected to pay. With much less money available for subsidies, the replacement plan provides a fixed amount that doesn’t adjust based on income or the local cost of insurance.
The budget office estimates that by 2026, a 64-year-old earning $26,500 could be paying—or more likely, not paying—an average of as much as $16,100 a year for insurance, even with the subsidy. Under the ACA’s subsidy formula that same consumer would be paying $1,700 a year.
4. States can turn the clock back to pre-Obamacare days, when people with pre-existing conditions were priced out of the individual insurance market. The replacement plan gives states the option of whittling down the ACA’s list of “essential health benefits” that all health insurance must cover.
It also says states can permit insurers to resume the practice of medical underwriting, meaning they can charge people with pre-existing conditions much more than healthy people.
The budget office expects that one in six Americans will live in states that elect both options. Eventually in those states “less healthy individuals … would be unable to purchase comprehensive coverage with premiums close to those under current law and might not be able to purchase coverage at all,” the budget office predicts.
5. Maternity and mental health care, rehabilitation, and expensive prescription drugs may become expensive luxury items. The budget office estimates that one-third of Americans will live in states that decide to lower the cost of insurance premiums by making those items optional instead of essential health benefits, as they are now. That means that insurers can cap the amount they will pay for these services—if they cover them at all. Or they can offer them as riders to people who expect to use them.
In the case of maternity coverage, for instance, the budget office says insurers would “price the rider at close to the average cost of maternity coverage, which could be more than $1,000 a month.”
6. Health insurance premiums will be lower, but not in a good way. Whether states opt to get rid of the ACA’s consumer protections or not, the budget office projects that premiums would drop nationwide by anywhere from 4 to 20 percent, for two main reasons.
First, the replacement plan allows insurers to charge older, and mostly sicker, consumers up to five times as much as younger, healthier ones (the ACA limits the difference to three times). Over time, older, lower-income consumers would be priced out of the market.
Second, the law would allow insurers to offer plans that cover less and/or have higher deductibles than what’s allowed under the ACA. Those plans would be cheaper but would leave many consumers with high out-of-pocket costs or unreimbursed medical expenses.
Nancy Metcalf is an award-winning independent journalist specializing in health topics. A senior writer and editor for Consumer Reports for more than 25 years, she is a nationally recognized expert on health insurance and health reform.