CBO: Bipartisan ACA Fix Would Reduce Deficit by $3.8 Billion

Implementing the Bipartisan Health Care Stabilization Act of 2017 crafted by Senators Lamar Alexander, R-Tennessee, and Patty Murray, D-Washington, to stabilize the Affordable Care Act's individual insurance markets would reduce the federal deficit by $3.8 billion over 10 years, according to a cost estimate from the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT).

Under the legislation, states would no longer need to enact legislation before submitting an innovation waiver application, a change which CBO and JCT estimate that these changes would increase the number of applications submitted by states and the likelihood that future waiver applications would be approved.

States with waivers under Section 1332 that were approved before the legislation's enactment would be allowed to request a recalculation of the pass-through funding they would be owed. The legislation would also modify the methodology for calculating pass-through payments in order to allow reductions in the Basic Health Program (BHP) subsidies caused by the terms of a waiver to be included in the calculation. Currently, Minnesota is the only state with an approved 1332 waiver and a BHP. With a recalculation, CBO and JCT estimate that it would receive approximately $436 million more in pass-through funding.

The legislation would fund cost-sharing reductions (CSRs) through 2019, and because such payments are already included in CBO’s baseline projections, it is estimated that the appropriation would not affect direct spending or revenues.

States would be required to submit plans to ensure that each health insurer provides a reimbursement or another financial benefit to consumers and the federal government in return for receiving payments for CSRs. CBO and JCT estimate that the government would receive $3.1 billion in rebates from insurers from 2018 to 2027.

Under the current law, typically only people under the age of 30 can enroll in a catastrophic plan in the nongroup insurance market, but the new bipartisan legislation would allow anyone in the nongroup insurance market to enroll in a catastrophic plan, which would be renamed copper plans, starting in 2019. CBO and JCT estimate that making catastrophic plans part of the single risk pool would lower premiums for other nongroup plans and would cause a $1.1 billion decline in federal cost for subsidies for insurance purchased through a marketplace from 2019 to 2027.

Currently, insurers participating in the federally facilitated health insurance marketplace are required to pay a user fee, which supports operations of the marketplace. The legislation would require the HHS to spend $105.8 million of current user fees on outreach and enrollment activities through 2019 and would not appropriate additional funds.

CBO and JCT estimate that the legislation would not increase direct spending or on-budget deficits in any of the 4 consecutive 10-year periods beginning in 2028. The legislation would also impose intergovernmental and private-sector mandates as defined in the Unfunded Mandates Reform Act, and the costs would fall below annual thresholds.