Healthcare policy in the United States is nothing short of a mess. Around 25% of Americans are very worried about being unable to afford healthcare services, while 22% of the population is concerned about losing coverage. And Trumpcare, the proposal to repeal and replace Obamacare, isn't helping Americans feel more secure: Just 16% of U.S. adults think the House of Representatives' healthcare reform bill is a good idea.
While the American public already largely opposes Trumpcare, there's a lot of confusion about what Trumpcare entails. There are actually two different versions: The American Health Care Act, the bill passed by the U.S. House of Representatives on May 4 (i.e, the one that Americans disapprove of by a 3-to-1 margin), and the Better Care Reconciliation Act of 2017, which the U.S. Senate has proposed. Neither bill has enough support to become law, so any bill that passes will necessarily contain some compromises.
That said, the Congressional Budget Office, a nonpartisan federal agency that provides information about legislation to Congress, has evaluated both the American Health Care Act (AHCA) and the Better Care Reconciliation Act (BCRA). Taking a close look at what the CBO says about the bills can help you understand how Trumpcare could affect your insurance coverage.
Trumpcare would raise some premiums and lower others
The House and Senate bills both make big changes to Obamacare that will affect insurance markets and premium costs. Some of the key changes:
- Obamacare forbids medical underwriting, i.e., pricing consumers' insurance policies based on their health risks. The AHCA permits states to allow medical underwriting for anyone who does not maintain continuous insurance coverage.
- Obamacare mandates that older policyholders be charged premiums no more than three times what younger Americans pay. Both the AHCA and the BCRA allow older Americans to be charged up to five times what younger Americans pay.
- Obamacare requires policies to cover certain essential health benefits (EHBs). Both the House and Senate bills relax these rules.
- Both the House and Senate versions of Trumpcare include various proposals to bring down insurance premiums, although their funding mechanisms work differently.
The CBO projects that premiums will be higher under both versions of Trumpcare than under Obamacare until 2020, after which they are expected to decline to varying degrees. It's harder to estimate Trumpcare's impact after that point, because both Trumpcare versions give states the opportunity to redefine essential health benefits. Here's what that CBO thinks could happen to premiums under Trumpcare, compared to what premiums would be if Obamacare were still the law of the land:
- In 2018: Premiums under both bills would be 20% higher than they would have been under Obamacare.
- In 2019: Premiums would be 5% higher under the House bill and 10% higher under the Senate bill.
- In 2026: Premiums under the Senate bill would be 20% lower. Under the House bill, premiums would drop by 4% in states not requesting EHB waivers and by 10% to 30% in states making moderate changes to Obamacare. Around 50% of Americans live in states not expected to ask for waivers, and one-half of the population lives in states likely to make moderate changes. Premiums for the remainder of the population living in waiver states were not estimated, because premiums would vary widely between young, healthy policyholders and old, sick ones.
Premiums are expected to initially rise because both versions of Trumpcare repeal Obamacare's individual mandate, which assesses an annual fee against American adults who don't purchase qualifying health insurance. Without the individual mandate, younger and healthier people will be more likely to forgo coverage, while older and sicker people will continue to buy, and use, insurance. That would drive up insurers' costs, and those costs would be passed on to consumers through higher premiums.
So why would premiums go down later?
- Older Americans would likely be charged much more than younger people under the House and Senate bills. Over time, more older Americans would forgo coverage, resulting in a younger and healthier market -- and thus lower premiums -- by 2026.
- Under the Senate bill, there's a change to how tax subsidies for insurance are calculated. While Obamacare bases its insurance subsidies on the costs of buying a policy that pays for 70% of healthcare costs, the BCRA bases subsidies on a plan covering 58% of healthcare costs. Consumers would buy plans with higher deductibles -- but less coverage -- so premiums would be lower.
The bottom line: Younger people and people who use less healthcare would benefit -- eventually. For the old and sick, both versions of Trumpcare would make coverage and care less affordable, the CBO forecasts.
Trumpcare would leave millions uninsured by 2026
If the AHCA were signed into law, 14 million fewer people would have insurance by 2018, according to the CBO. By 2020, 19 million fewer people would have insurance coverage. By 2026, the number of people with insurance would be 23 million lower than it would be if Obamacare were still law.
Under the BCRA, the CBO estimates that 15 million more people would be uninsured by 2018; 19 million more people would be uninsured by 2020; and 22 million people would be uninsured by 2026.
Many factors contribute to the forecast increase in uninsured Americans:
- Both the House and Senate versions of Trumpcare roll back Obamacare's expanded Medicaid eligibility. The AHCA would freeze Medicaid expansion beginning March 1, 2017, while the BCRA would permit states to continue enrolling individuals with incomes up to 133% of the federal poverty level through Dec. 31, 2017. The federal government will continue subsidizing costs for those who became eligible for Medicaid under Obamacare's expanded eligibility rules through Dec. 31, 2019 under the House bill or through Dec. 31, 2020 under the Senate bill.
- Reduced tax credits, higher premiums for older Americans, and relaxed protections for pre-existing conditions could make policies cost-prohibitive, especially for older and sicker Americans.
- The repeal of the individual mandate means some policyholders would voluntarily opt out of coverage.
Many policyholders would also opt for less comprehensive policies with lower premiums, forcing policyholders to shoulder more of the burden of paying routine care costs.
Trumpcare could destabilize the insurance market in 2020
Under the House bill, the individual insurance market would remain stable in many parts of the country through 2020, in large part because subsidies would continue to drive demand for policies among people with low healthcare expenditures. The Patient and State Stability Fund -- essentially a slush fund of more than $100 billion distributed among states to use as they see fit to stabilize insurance markets -- would also reduce the costs of insuring people with high healthcare expenditures, making markets more stable. However, the CBO warns that approximately one-sixth of the population resides in areas where markets could become unstable in 2020 if states request waivers from Obamacare provisions. In waiver states, healthy people would be able to buy lower-cost, medically underwritten coverage, leaving people with serious medical conditions locked out of coverage or forced into high-priced policies.
Under the Senate bill, substantial funding is provided through 2022 to stabilize markets. BRCA appropriates $50 billion through 2022 through a short-term stability fund insurers can apply for, and $62 billion from 2019 to 2026 as part of a long-term stability fund. After 2019, a small fraction of policyholders -- most in sparsely populated areas -- would find themselves in unstable insurance markets because low demand for coverage could result in insurers dropping out of markets.
Trumpcare would reduce the deficit
Between 2017 and 2026, the AHCA would reduce spending by $1.1 trillion and reduce revenue by $992 billion. The net reduction in the deficit would be $119 billion. That deficit reduction would come primarily through an $834 billion cut in federal Medicaid spending, achieved by rolling back Obamacare's Medicaid expansions and changing how Medicaid is funded. Reduced insurance subsidies would account for another $276 billion in savings. The drop in revenue is attributed to the repeal of Obamacare's individual and employer mandates, as well as the repeal of many Obamacare taxes.
The BCRA would reduce spending by $1 trillion and reduce revenue by $701 billion, thus reducing the deficit by $321 billion from 2017 to 2026. Reductions in both spending and revenue would owe to similar changes.
This deficit reduction would undeniably come at the cost of millions more uninsured Americans, which many believe is too high a price to pay.