May 25, 2017

Many people approaching retirement age would pay more for worse coverage under the American Health Care Act (AHCA), and some would eventually be unable to buy coverage at all on the individual market, according to a report released Wednesday by the nonpartisan Congressional Budget Office.

Premium prices would rise across the board for lower-income pre-retirees under the healthcare bill which passed the House earlier this month. This is because the bill’s premium subsidies are less generous for this demographic than those under Obamacare. Also, the bill would allow insurers to charge consumers approaching age 65 five times what younger consumers pay, versus three times currently. Older adults have long been concerned about the rising cost of healthcare, and the bill would make things even worse for them, says David Certner, AARP legislative policy director. “There’s nothing in this bill to reduce the cost of prescription drugs or to help premiums go down,” he says.

In 2026, a single 64-year-old with an income of $26,500 would pay $16,100 annually in net premiums (after subsidies) in certain states under the AHCA, more than nine times the $1,700 cost under current law, according to estimates in the CBO report.

Yet in one sense, this would be a lucky consumer: He or she lives in a state that chose not to weaken consumer protections and thus this person could still buy a comprehensive policy regardless of any pre-existing conditions. The ability to secure affordable individual health coverage after leaving—or getting laid off from—a job is critical for older consumers under the Medicare eligibility age of 65.

Older consumers who make too much to qualify for premium subsidies wouldn’t see big changes to their premiums in no-waiver states under the AHCA. A single 64-year-old making $68,200 would pay $15,300 in premiums in 2026 under current law; that would rise an estimated 5% to a net $16,100 under the AHCA, the CBO says.

Waivers Weaken Protections

The AHCA would allow states to apply for waivers that would weaken protections for pre-existing conditions, which disproportionately affect older consumers. Some 84% of people ages 55 to 64 have pre-existing conditions, according to a recent report by Aviva Aron-Dine of the Center on Budget and Policy Priorities.

One proposed waiver would allow insurers to charge unhealthy people higher premiums under certain circumstances, and another would allow states to set their own definition of essential health benefits. Currently, the Affordable Care Act (ACA), also known as Obamacare, mandates that most health plans include a robust array of benefits, including hospital and prescription drug benefits. Under the proposed Obamacare replacement, states could choose to narrow the list of required services for their residents.

One-sixth of the U.S. population, or roughly 54 million people, live in states that would apply for both waivers, according to CBO projections. (The report didn’t specify which states the CBO projects those would be.) In these states, premiums would vary greatly according to consumers’ health status. While healthy people might pay less than they do currently, the CBO said sicker people would face “extremely high premiums” despite additional funding that the bill includes to help more vulnerable consumers.

The individual insurance market in these extensive-waiver states would likely become unstable, and rapidly increasing premiums would over time make it difficult for sicker people to buy any coverage at all, according to the report.

Paying More for Less

About a third of the population lives in states that would apply for a waiver to make moderate changes to current market regulations if the AHCA becomes law, the CBO projects. These states would likely change their definition of essential health benefits, resulting in average non-group premiums of roughly 20% less across the board by 2026.

Younger, healthier people would overwhelmingly benefit from these lower premiums. In 2026, a single 21-year-old making $26,500 would pay $1,250 in net annual premiums in states that make moderate changes to essential health benefits, versus $1,700 under current law, the CBO said. But a single 64-year-old earning the same amount would pay $13,600 annually in net premiums in the same state, versus just $1,700 under current law for more comprehensive benefits, according to the CBO report.

In addition to premium increases, older consumers’ out-of-pocket costs would rise in moderate-waiver states since their plans would cover less, the report says. For example, if prescription drugs were removed from a state’s list of required health benefits, those who use expensive medications would face big outlays. What’s more, these out-of-pocket expenses would be unlimited, since the existing cap on annual and lifetime spending only applies to essential health benefits.

What about higher-income pre-retirees? A single 64-year-old making $68,200 would pay $15,300 in premiums in 2026 under current law. The cost would fall to a net $13,600 in states that requested moderate changes, although those savings might be swallowed by up increased out of pocket costs.

The CBO did not provide premium projections for extensive-waiver states, saying those markets would be too unstable for meaningful estimates.

The AHCA has progressed to the Senate, where lawmakers will use the CBO report to inform their work on the legislation. If the bill passes the Senate, President Donald Trump is expected to sign it into law to make good on his campaign promise of repealing and replacing Obamacare.

 

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