Congressional Budget Office (CBO) Report on the ORRA – Executive Summary

 

I. Introduction
II. Effect on Federal Budget
III. Effect on Health Insurance Coverage
IV. Effect on Stability of Health Insurance Market
V. Effect on Insurance Premiums


I. Introduction

After apparently failing to garner enough votes in support of the Better Care Reconciliation Act (“BCRA”), Republican leaders are now going back to “Plan A” in efforts to repeal the Affordable Care Act.  According to Republicans, the Obamacare Repeal Reconciliation Act of 2017 (“ORRA”) would completely repeal the Affordable Care Act (“ACA”) in two years and offer no replacement program.  The ORRA is nearly identical to the bill that President Obama vetoed in 2015.  However, in truth the ORRA leaves in place many of the same provisions as the ACA, such as the requirement that insurers may not discriminate against those with pre-existing conditions.  Additionally, the bill includes a couple of provisions not found in the 2015 bill, including the prohibition of premium tax credits for small business tax credits for plans that cover abortions.

Although many GOP Senators have spoken against a repeal-only bill, President Trump has recently encouraged Republican leaders to take this approach.

The Congressional Budget Office (“CBO”) released an economic analysis of the ORRA on July 19, 2017.  The agency reports that by 2018, 17 million more people would be uninsured than would be under current law.  That number would increase to 27 million in 2020, and finally to 32 million in 2026.  The CBO projects that the ORRA would decrease the federal deficit by $473 billion from 2017 to 2026.

You can view the CBO’s full report here.
To read our summary of the CBO’s analysis of the BCRA with amendments, you can go here.
To read our summary of the CBO’s analysis of the American Health Care Act (“AHCA”) with all amendments, you can go here.


II. Effect on the Federal Budget

The CBO estimates that the ORRA would reduce federal deficits by $473 billion from 2017-2026.  This is the result of a $1,429 billion decrease in direct spending offset by a $956 billion decrease in revenues.  The CBO’s key findings regarding the net deficit reduction are as follows:

– Medicaid would lose $842 billion as a result of the ORRA, primarily because the Medicaid Expansion would end in 2020.
– Cuts in subsidies for individual insurance plans would reduce the deficit by $679 billion.
– Repealing a tax credit for small employers who provide health insurance to employees  would reduce the deficit by $6 billion.

The CBO also projects the following decreased revenues and shifts in spending:

– Repeal and modification of tax provisions in the ACA, such as the $500,000 limit on business expense deductibility for compensation to insurance executives, would increase the deficit by approximately $613 billion from 2017-2026.
– Elimination of the individual mandate and the employer mandate reduces revenues by $210 billion.
– The Medicare program would receive an additional $21 billion because of changes to disproportionate share hospital payments.
– Other miscellaneous provisions would increase deficits by $210 billion.


III. Effect on Health Insurance Coverage

The CBO estimates that the ORRA would substantially increase the number of uninsured Americans.  The chart below illustrates the CBO’s findings.

 

Year Number of Uninsured under the ORRA
2018 17 million more uninsured than under the ACA

(Total: 43 million uninsured v. 26 million uninsured under the ACA)

Estimate includes (all figures as compared to the ACA for that year):
4 million fewer insured by Medicaid
10 million fewer insured on individual market
2 million fewer insured by employer

2020 27 million more uninsured than under the ACA

(Total: 55 million uninsured v. approx. 27 million uninsured under the ACA)

Estimate includes (all figures as compared to the ACA for that year):
15 million fewer insured by Medicaid
22 million fewer insured on individual market
10 million more insured by employer

2026 32 million more uninsured than under the ACA

(Total: 59 million uninsured v. approx. 27 million uninsured under the ACA)

Estimate includes (all figures as compared to the ACA for that year):
19 million fewer insured by Medicaid
23 million fewer insured on individual market
11 million more insured by employer

 

In 2018, fewer people on the individual market would have coverage under the ORRA.  That reduction primarily stems from repealing the individual mandate penalty.  However, the CBO expects that insurers in some areas would leave the individual market in 2018 because of the projections in lower enrollment and higher healthcare costs.  As a result, about 10% of the U.S. population would live in an area that had no insurer participating in the exchanges in 2018.  This number would likely increase over the next decade.

In 2020, the Medicaid Expansion would end and individuals would no longer receive subsidies for plans purchased through the ACA marketplaces.  This would cause uninsured rates to spike that year, forcing more people to get insurance from their employers.


IV. Effect on Stability of the Health Insurance Market

The ORRA would leave in place a number of ACA regulations that require insurers to 1) provide specific benefits and amounts of coverage; 2) not deny coverage or increase premiums because of pre-existing medical conditions; and 3) adjust premiums only on the basis of age, tobacco use, and geographic location.  However, the bill would remove penalties for individuals who do not obtain health insurance and for employers who do not offer coverage.  It would also eliminate subsidies for individuals purchasing plans on the marketplace.

The CBO projects that removing the individual mandate penalty and insurance subsidies while retaining the market regulations would destabilize the individual market.  This would reduce enrollment and raise premiums in this market.  Additionally, the people who remained enrolled would likely be less healthy (as they are more willing to pay the higher premiums).  As a result, average health costs would be higher in that market, leading to insurers further increasing their premiums.  The CBO expects that the effect would worsen over time.

However, the ORRA would leave the ACA’s market regulations in place, which would limit insurers’ ability to use strategies that were common before the implementation of the ACA.  The CBO explains that, for example, insurers could not change premiums to reflect an individual’s health care costs or offer health insurance plans that exclude coverage of pre-existing conditions.

Because of this, many individuals and insurers are likely to leave the individual markets if the ORRA takes effect.  The CBO estimates that about half of the U.S. population would live in areas that would have no insurer participating in the individual market in 2020.  That figure would increase to about 75% of the population by 2026.


V. Effect on Insurance Premiums

The CBO estimates that enactment ofthe ORRA would cause insurance premiums to increase substantially.  In 2020, silver plans on the individual market would cost 50% more compared to the ACA.  By 2026, that number would almost double.  The CBO expects that lower income people would be unable to afford any plans on the individual market, as premiums would comprise of a large percentage of their income.  Furthermore, deductibles for plans with lower premiums would be high.  As a result, the CBO projects that few low-income people would purchase any plan.