CMS Actuary Projects AHCA to Save $328 Billion, Reduce Coverage by 13 Million

The CMS Office of the Actuary released a report projecting the financial and coverage impacts of the American Health Care Act (AHCA) passed by the House, finding that 13 million more people would be uninsured by 2026, but the federal government would reduce expenditures by $328 billion.

The number of uninsured is 10 million fewer than the 23 million projected to lose coverage in the Congressional Budget Office (CBO) score released on May 24. The CMS actuary also projected the AHCA would reduce federal spending by $328 billion, nearly 3 times more than the $119 billion in savings estimated by the CBO.

Like the CBO, the CMS actuary is an independent advisory office that aims to provide nonpartisan estimates for proposed legislation such as the AHCA. The 2 reports identified similar causes for the projected rise in uninsurance, including restricted Medicaid eligibility, the repeal of the individual mandate, and less available subsidies to assist with purchasing insurance. Likewise, both reports determined that the main drivers of cost savings would be the reduced market subsidies, the rollback of Medicaid expansion, and the conversion of Medicaid to a per capita allotment system.

However, the CMS actuary used a different methodology to calculate the potential effects of the AHCA on insurance premiums. Estimating that one-fourth of states would apply for waivers from community rating and essential health benefits, it projected that average gross premiums before tax credits would be about $97 (16%) lower under the AHCA by 2020 than under current law, due to the effects of the waivers, less generous coverage, and assistance from the Patient and State Stability Fund (PSSF). The average net premium that would be paid by individuals would be $27 lower by 2020. It also estimated that cost sharing would increase by 54%, or $95, by 2020 due to the less generous coverage and the lack of cost-sharing reduction subsidies.

The estimates for 2026 include a 13% reduction in gross premiums, but a slight increase ($19 or 5%) in net premium costs, as the report projects that the age-based premium subsidies would not rise at the same rate as costs and that the funds reserved for maternity, mental health, and pre-existing conditions would be drained.

“By 2026 an individual would be anticipated to pay nearly 27 percent more, or $162, in combined monthly premiums and cost sharing under the AHCA relative to current law,” the report determined.

Noting that these estimates assume a “viable and stable” individual market under both the current and the proposed laws, the report noted that various components of the AHCA could either strengthen or destabilize the market. For instance, the PSSF funding and the 30% penalty for not maintaining continuous coverage could help the market function better.

On the other hand, waivers that drastically restrict essential health benefits or allow annual underwriting of healthy people could have a detrimental effect, according to the report. The actuary noted that implementation of these actions would lead them to “expect that the individual market in these areas would destabilize such that the premiums for comprehensive coverage for a significant proportion of the population would become unaffordable and the coverage would cease to be offered.”

Another key similarity between the CMS actuary report and the CBO score is the caveat that long-term impacts are extremely difficult to predict, as they depend on states’ waiver decisions, market stability, and the behavior of individuals, employers, and insurers. The CMS actuary emphasized that “the estimates highlighted in this memorandum assume only one of many possible paths,” and that the actual costs and coverage changes could land outside of the projections made in this report or those of other agencies.

“I hope that the information presented in this memorandum will be of value to the public and policy makers as they debate the implications of the American Health Care Act,” concluded chief actuary Paul Spitalnic, ASA, MAAA.