New Analysis: Repeal of the Affordable Care Act through Reconciliation Throws Almost 30 Million off Coverage

Health economists at the Urban Institute have released a new analysis of the effects of repealing the Affordable Care Act (ACA) through a legislative process called budget reconciliation. Their projections show that close to 30 million people will become uninsured.

What do the Urban Institute estimates show?

If Congress repeals key provisions of the ACA through reconciliation, millions would lose access to affordable coverage. Specifically:

  • 29.8 million people will lose health coverage.
  • The uninsured rate for people under 65 will grow from 11 percent to 21 percent.
  • 82 percent of those becoming uninsured are in working families, 38 percent are between ages 18 and 34, 56 percent are non-Hispanic whites, and 80 percent do not have college degrees.
  • 12.9 million people will be thrown off Medicaid or CHIP.
  • 9.3 million people will lose tax credits for private, non-group health insurance.

Bottom line? If Congress pursues repeal through a budget reconciliation bill, it doesn’t just move us back to the coverage levels we had before the ACA was enacted. It actually makes us worse off, leading to higher uninsurance rates than existed, pre-ACA.

Why would uninsurance rates be higher than they were, pre-ACA?

The Urban Institute estimates reflect one of the challenges of trying to repeal a major law, such as the ACA, through the budget reconciliation process. This process, which allows legislation to avoid a Senate filibuster and pass with a simple 51-vote majority, has important limitations. Specifically, Senate rules require that its provisions have a direct budgetary impact. This means that the bill can repeal the ACA’s premium and cost-sharing subsidies, the individual mandate penalty, and the Medicaid expansion. Other key provisions, such as the requirement that insurers cover all applicants, regardless of health status, and provide a minimum set of essential health benefits, cannot be included because they don’t directly affect federal revenues or spending.

The ACA is often referred to as a “three-legged stool,” with three key provisions that are inextricably linked. First, to protect people with pre-existing conditions, the ACA includes insurance reforms that prohibit insurers from denying or charging people more for coverage based on their health status. Second, to discourage people from waiting until they get sick to purchase coverage, which drives up costs, the ACA includes a requirement that people maintain health insurance (the “individual mandate”). If they don’t, they must pay a penalty. Third, if people are required to buy insurance, it needs to be affordable. So the ACA provides for premium tax credits and cost-sharing subsidies for low- and moderate-income families.

The budget reconciliation bill would knock out two legs of that 3-legged stool, by repealing the federal tax credits and the individual mandate. The requirements that insurers cover people with pre-existing conditions, refrain from charging them more based on health status, cover essential health benefits and meet actuarial value standards will remain.

What happens when you knock out two legs of a 3-legged stool? You get a market collapse. As a result, repealing the ACA through reconciliation doesn’t just result in the newly insured losing coverage, it will also cause insurers to leave the individual market or increase premium rates so high that many who purchase insurance, including those higher-income individuals who don’t qualify for ACA subsidies, will find it unaffordable. The people most likely to drop coverage first? Healthy people who don’t need a lot of insurance. It’s a well-known insurance phenomenon called the “death spiral,” and the Urban Institute analysis gives us a pretty grim picture of what it will mean for consumers who need coverage.

You can read the full Urban Institute report, including additional projections about the effects of ACA repeal on state and federal spending and budgets, here.

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