Non-Partisan CBO Says AHCA Would Reduce Coverage and Benefits

May 25, 2017

Category: Benefits

FLSA Overtime

The Congressional Budget Office (CBO) released its report on the revised American Health Care Act (AHCA), which will soon reach the Senate floor. The CBO found that while the new bill would save the nation $119 billion over the next ten years, it would also reduce the benefits provided, and decrease the number of insured by 23 million.

What is the CBO?

The CBO is a non-partisan organization founded in 1975 to provide professional, unbiased analysis of proposed legislation. Each year, the CBO scores the President’s budget and other proposed legislation. For example, in 2011, the CBO estimated that in light of the Affordable Care Act’s (ACA) passage, 93% of Americans under the age of 65 would be insured by 2016. After the Supreme Court’s 2013 ruling that limited the scope of Medicaid advancement, the CBO adjusted that estimate to 89%.

What does the CBO report say about the AHCA?

The CBO found that the new bill is likely to increase the number of uninsured Americans by 23 million over the next ten years. On the other hand, the bill is also likely to reduce the cumulative federal budget deficit by $119 billion over the 2017-2026 period.

In March, the CBO scored the initial House bill, and found that the number of uninsured Americans would rise by 24 million over the next ten years, while the budget savings would be approximately $151 billion over the same time period.

Why has the outlook changed?

The AHCA would let states waive or alter the requirement that health insurance plans cover essential health benefits. The CBO’s estimate assumes that some states would opt for these waivers, and coverage offered in those areas would revert to the pre-ACA landscape, where 62% of enrollees in individual marketplace plans did not have maternity coverage and almost 10% lacked prescription drug coverage.

The CBO report projects that about half of Americans live in states that would request waivers. Here’s what that means:

  • Reduced coverage of these essential services
  • Lowered premiums for the average person
  • Substantially higher out-of-pocket spend for consumers
  • “Community-rated” premiums (group health plan premiums based on location and age) may stabilize and drop at the outset, but will ultimately increase.
  • For individuals with pre-existing medical conditions, access to affordable coverage – or any coverage – will be in doubt under the AHCA. The report explains:

“Community-rated premiums would rise over time, and people who are less healthy (including those with preexisting or newly acquired medical conditions) would ultimately be unable to purchase comprehensive nongroup health insurance at premiums comparable to those under current law, if they could purchase it at all—despite the additional funding that would be available under H.R. 1628 to help reduce premiums.”

The reduction in the number of insured Americans is mostly attributable to the substantial cuts in Medicaid proposed under the AHCA.  More than 14 million Americans would cease to qualify for Medicaid over the next 10 years under the AHCA.

CBO: Changes in Medicaid enrollment


What Does It Mean?

As the Senate searches for 50 votes for the AHCA, these issues are expected to be at the center of debate about the proposed law. Small businesses and Americans across the country will be watching carefully to understand what their access to healthcare and the costs of that access will be – and whether deficit reduction and lower premiums for lesser coverage will be the new reality.

Under the AHCA, companies would have different requirements in different states – and a vastly different landscape than the one that exists today. The CBO projects that one-sixth of the insurance marketplace is vulnerable to substantial destabilization over the next four years as a result of the proposed changes and the expected market reactions to these changes.

The Senate is preparing to debate the AHCA and it is likely that it will send a new version of the AHCA back to the House to reconcile before any bill is sent to the President.  For now, the AHCA is only a proposed law. Until then, the ACA’s employer reporting, individual coverage mandate, and essential health benefits protections remain in effect.

Employee benefits are critical for recruitment and retention, but how do you know if you’re being competitive enough? Download our free eBook, Zenefits Small Business Benchmark Report, to get a snapshot of plan types, contributions, premiums, deductibles, copays, and out-of-pocket costs across different regions.


Jordan Mazur is Legal Counsel at Zenefits. As the son of healthcare professionals and small business owners, he is committed to connecting small businesses and their employees with healthcare benefits and HR tools to make their work and lives easier. He is an avid runner and serves as sous-chef to his three-year-old daughter in her culinary experiments.

Category: Benefits

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