How Senate repeal bill changes current law


See how the Senate repeal bill would affect deductibles in 9 states.

Current law

The Patient Protection and Affordable Care Act (ACA) provides premium tax credits (PTCs) to certain people with incomes between 100 and 400 percent of the federal poverty level (FPL)—respectively $13,670 and $54,680 in 2017 for single individuals in the lower 48 states. Those who use PTCs to buy so-called “benchmark plans” pay specified amounts in premiums, based on their income. Such “benchmark plans” provide silver-level coverage, with actuarial value (AV) of 70 percent. This means that, for an average population, the insurer pays 70 percent of all covered costs. According to the Congressional Budget Office (CBO), the average silver-level plan has a 2017 individual deductible of $3,660.1

PTC beneficiaries with incomes at or below 250 percent of FPL also qualify for cost-sharing reductions (CSRs). The amount of assistance depends on income:

  • Those with incomes at or below 150 percent of FPL qualify for CSRs that raise AV to 94 percent—coverage with average 2017 deductibles of $300, according to CBO.
  • Those with incomes between 150 and 200 percent of FPL qualify for CSRs that raise AV to 87 percent. Plans in this category have average deductibles of $800 in 2017.
  • Those with incomes between 200 and 250 percent of FPL qualify for CSRs that raise AV to 73 percent. Plans with this level of AV have average deductibles of $2,900 in 2017.

The Better Care Reconciliation Act of 2017 (BCRA)

BCRA changes PTCs in several ways that are relevant to this analysis. First, effective in 2020, the “benchmark” premium is changed to a plan with 58 percent AV—significantly less than the ACA benchmark of 70 percent AV and below even the 60 percent AV now provided by bronze-level coverage under the ACA. CBO estimates that, in 2017, bronze plans have average individual deductibles of roughly $6,000. Second, maximum eligibility for PTCs declines from 400 percent to 350 percent FPL.

BCRA also eliminates CSRs, effective in 2020. Consumers with incomes below 250 percent FPL would receive only PTCs, which would be structured to purchase coverage with 58 percent AV, as noted earlier.

Methodology

To analyze the impact of BCRA on deductibles, we use HHS data about 2016 marketplace enrollment to determine the number of state residents who received each level of CSR2 and who received PTCs without CSRs.3 Our state-specific analysis sets out the number in each category—namely, those who, under the ACA:

  • Receive CSRs that raise AV to 94 percent, receiving coverage with average deductibles of $300;
  • Receive CSRs that raise AV to 87 percent, receiving coverage with average deductibles of $800;
  • Receive CSRs that raise AV to 73 percent, receiving coverage with average deductibles of $2,900; and
  • Do not receive CSRs but receive PTCs that purchase coverage with 70-percent AV, which has average deductibles of $3,660. From the count of PTC beneficiaries without CSRs, we subtract the estimated number of PTC beneficiaries who enroll in bronze coverage, based on the percentages reported by HHS for the end of the 2016 open enrollment period.4

We do not estimate the number of people who would purchase coverage at different AV levels. Rather, we show what would happen if people who buy coverage today at levels that reflect their subsidy receipt—coverage with CSRs or coverage at the benchmark level purchased by PTCs without CSRs--continue to buy coverage that reflects their receipt of subsidies, but at the reduced level proposed in BCRA rather than current subsidy levels.

In several ways, the analysis underestimates BCRA’s impact in raising deductibles:

  1. Our estimates assume, in effect, that plans with 58 percent AV have $6,000 deductibles. That is the amount CBO describes as average for bronze-level plans in 2017, which have 60 percent AV. We believe this is a conservative assumption regarding deductible levels. In fact, BCRA pegs premium tax credits to coverage less generous than any bronze plans sold in 2017. Based on the federal tool used to measure generosity of 2018 plans, deductibles for plans with 58 percent AV are likely to be around $7,350.5
  2. The most recent administrative data showing the number of people receiving CSRs at each level are from 2016. The deductible amounts we use to estimate the impact of BCRA are CBO’s estimates for 2017. Had we used 2016 average deductibles to accompany administrative data about 2016 enrollment levels, we would have found BCRA to have a greater impact in raising deductibles.6
  3. We count 2016 PTC recipients of all income levels among those who would pay $6,000 deductibles under BCRA. This includes those with incomes between 350 percent and 400 percent FPL who would no longer qualify for PTCs under BCRA and so would be buying coverage unassisted. If they maintain their spending for premiums (that is, spend the amounts that would, combined with PTCs provided under the ACA, would have purchased benchmark coverage), their deductibles for now completely unsubsidized coverage are likely to be higher than $6,000.
  4. We do not estimate the number of PTC beneficiaries without CSRs who currently enroll in gold or platinum coverage, which respectively has 80 and 90 percent AV. Nationally, in states where consumers obtain marketplace coverage using the healthinsurance.gov federally-facilitated platform, an estimated 13 percent of all PTC beneficiaries without CSRs enroll in gold plans.7 According to research published by the Commonwealth Fund, the average individual deductible for gold plans in 2016 was $1,257.8 These consumers’ deductibles would thus increase by $4,743, rather than the $2,400 average we assign to PTC beneficiaries without CSRs who are not enrolled in bronze plans.
  5. BCRA authorizes states to reduce essential health benefits (EHBs). AV is determined based on a standardized population’s utilization of EHBs.9 The deductibles described in our analysis, under BCRA, thus apply to coverage of EHBs alone. A state that removes a benefit from the EHB package would require consumers to pay additional out-of-pocket for the removed benefit, in addition to paying the increased deductibles described in our analysis.

    Such additional costs could be quite significant for consumers who use services no longer classified as EHBs.

Our analysis has other limitations. First, it reflects 2016 enrollment levels, incorporating the most recent available administrative data about coverage by CSR level. In 2017, marketplace enrollment is slightly lower than in 2016. Second, the income-based amounts that suffice to purchase benchmark coverage would vary based on age under BCRA. As a result, age could influence consumers’ financial capacity to use PTCs to purchase coverage more or less comprehensive than 58-percent AV benchmark plans. We do not take this factor into account in our estimates. Third, in estimating 2016 enrollment at various levels of premium and cost-sharing support, we combine several different HHS reports, each of which addresses discrete but related topics: the number of people with CSRs at each level; the number of people receiving PTCs but not CSRs; the total number receiving marketplace coverage; and the percentage of PTC beneficiaries who enroll in bronze coverage. Ideally, one source of administrative data would provide all of this information, but no such source was available. Fourth, we use CBO’s national-average estimates of average deductibles in plans at various AV levels. Average deductibles may vary by state. However, such variation is modest, since the percentage of health care claims paid by plans with a specified AV does not change from state

Endnotes

1 Average deductible amounts at each level of cost-sharing reduction (CSR) and for people in silver plans without CSRs are taken from CBO’s cost estimates for BCRA. CBO. June 26, 2017. “H.R. 1628 Better Care Reconciliation Act of 2017,” CBO Cost Estimate. See page 27, footnote 3, downloaded 7/4/2017.

2 Numbers of people receiving CSRs at each level are from HHS Assistant Secretary for Planning and Evaluation (ASPE). December 22, 2016. “Health Insurance Marketplace Cost Sharing Reduction Subsidies by Zip Code and County 2016.” downloaded 7/4/2017.

3 Numbers of people receiving PTCs but not CSRs are from HHS Centers for Medicare and Medicaid Services (CMS). June 30, 2016. “First Half of 2016 Effectuated Enrollment Snapshot.” downloaded 7/4/2017.

4 ASPE. March 11, 2016. “Addendum to the Health Insurance Marketplaces 2016 Open Enrollment Period: Final Enrollment Report for the period: November 1, 2015 – February 1, 2016.” ASPE Issue Brief. See Appendix Table C14, downloaded 7/5/2017.

5 The Senate health care repeal bill ties premium tax credits to the median premium of plans with a 58 percent actuarial value. Using CMS’s federal actuarial value calculator for 2018, a plan with an individual deductible equal to the annual out-of-pocket cost-sharing limit for 2018, which is $7,350, has an actuarial value of 58.54 percent. 

6 Moving from silver to bronze coverage would have increased average deductibles by 85%, rather than 67%; moving from 73 percent AV coverage to bronze would have increased average deductibles by 133% rather than 107%; moving from 87 percent AV to bronze would have increased average deductibles by 699% rather than 650%; and moving from 94 percent AV to bronze would have increased average deductibles by 2,227% rather than 1,900%. Author’s calculations, Jon Gabel, Heidi Whitmore, Matthew Green, Adrienne Call, Sam Stromberg, and Rebecca Oran. October 2016. “The ACA’s Cost-Sharing Reduction Plans: A Key to Affordable Health Coverage for Millions of U.S. Workers.” The Commonwealth Fund, downloaded 7/11/2016; Jon Gabel, Matthew Green, Adrienne Call, Heidi Whitmore, Sam Stromberg, and Rebecca Oran. May 2016. “Changes in Consumer Cost-Sharing for Health Plans Sold in the ACA’s Insurance Marketplaces, 2015 to 2016.” The Commonwealth Fund, downloaded 7/6/2017.

7 According to ASPE March 11, 2016, 4 percent of all PTC beneficiaries in states using the healthinsurance.gov platform enroll in gold plans. Calculated as a percentage of PTC beneficiaries in such states who do not receive CSRs, as shown in CMS June 30, 2016, that amounts to 13 percent.

8 Gabel, et al., May 2016.

9 Timothy Jost. November 21, 2012. “Implementing Health Reform: Essential Health Benefits, Actuarial Value, And Accreditation.” Health Affairs Blog. downloaded 7/6/2017.