The Effects of the American Health Care Act on Health Insurance Coverage and Federal Spending in 2020 and 2026

by Christine Eibner, Jodi Liu, Sarah Nowak

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Research Question

  1. What effects would the American Health Care Act's major provisions have had on health insurance enrollment, the cost of individual market coverage, and federal spending?

In this report, the authors analyzed a version of the American Health Care Act (AHCA), a bill proposed in the U.S. House of Representatives on March 6, 2017. The bill would have repealed many of the provisions of the Affordable Care Act (ACA) and replaced them with alternative reforms. The authors used RAND's COMPARE microsimulation model to assess how the AHCA would have affected such outcomes as health insurance enrollment, consumer out-of-pocket costs, and the federal deficit relative to the ACA. This analysis relies on the version of the bill dated March 6, 2017, with several updates to account for the March 20 "Manager's Amendment."

This analysis finds that the AHCA would have resulted in a reduction in health insurance enrollment of 14.2 million in 2020 and a reduction in health insurance enrollment of 19.7 million in 2026. While the magnitude of the estimated coverage reductions is smaller than those of the Congressional Budget Office (CBO), this analysis confirms CBO's general finding that the AHCA would have substantially reduced insurance enrollment relative to current law. Those without insurance under the AHCA would have tended to be older, sicker, and poorer than those currently uninsured.

Key Findings

Health Insurance Enrollment Would Have Decreased

  • The authors estimate that the American Health Care Act (AHCA) would have reduced health insurance enrollment by 14.2 million people in 2020; the loss of health insurance would have increased to 19.7 million people by 2026.
  • The AHCA would have increased the federal deficit by $38 billion in 2020 while reducing the deficit by $5 billion in 2026.

Older Individuals, Poorer Individuals, and Those with Worse Self-Reported Health Would Have Been Disproportionately Affected by the AHCA

  • Most adults ages 50 to 64 and most people with incomes under 200 percent of the federal poverty level (FPL) would have paid more for individual-market insurance under the AHCA than under current law. The higher costs for older adults partly reflect that the AHCA's tax credits did not increase as steeply with age as premiums did.
  • In 2020, the number of uninsured individuals age 50 to 64 would have been 119 percent larger under the AHCA than under the ACA, compared with a 42-percent increase for those under age 50.
  • The authors estimated an 80-percent increase in the number of uninsured people with incomes at or below 200 percent of the FPL under the AHCA, compared with a 15-percent increase in the number of uninsured people with incomes above 200 percent of the FPL.
  • The authors also found a 99-percent increase in the number of uninsured individuals in poor or fair self-reported health; this finding reflects that sicker people are more likely than healthy people to be older and poorer and are thus more likely to lose access to Medicaid or face high premiums in the individual market.

Recommendations

  • To retain current insurance enrollment levels without increasing the federal deficit, one possible solution would be to better target tax credits based on enrollees' needs — for example, by increasing the amount of funding available for lower-income individuals. In theory, such an approach could lead people to forgo employment opportunities or reduce their hours worked to retain eligibility for tax credits. However, evidence to date shows no such effects stemming from the ACA's coverage expansions.
  • In addition, policymakers might consider higher tax credits for older adults to address the concern that premiums increase more steeply than credit amounts.

Research conducted by

The research described in this report was funded by the Commonwealth Fund and conducted by RAND Health.

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