How the Republican Health-Care Bill Would Change Premiums

It depends on your state and what it decides.

Jim Cole / AP

According to the Congressional Budget Office’s latest score of the Republicans’ Obamacare replacement bill, 23 million people would lose health insurance by 2026 if the bill were to become law.

That much is known. But much of what each individual’s insurance options and costs would look like depends on decisions their states make about what kinds of services to cover. In doing so, the bill, which passed the House of Representatives earlier this month, demonstrates a dramatically different philosophy toward health insurance than the one taken by the Obama administration through the Affordable Care Act. Instead of a single, nationwide system of taxes and benefits designed to extend the same kind of insurance to each American, under the GOP bill, health insurance would be all about location, location, location. And waivers.

Under Obamacare, insurers must cover a set of “essential health benefits”—things like maternity care and mental-health treatment—and they have to charge everyone the same amount, no matter how sick people are. But the Republican bill, the American Health Care Act, allows states to apply for waivers from both of those provisions.

The CBO can’t know exactly which states would apply for these waivers, but here’s what it predicted:

  • About half the population, the CBO estimates, lives in states that won't request either of those waivers. There, premiums would be about 4-percent lower on average than under Obamacare, but older people would have to pay significantly more than younger people would.
  • Another third lives in states that would make some moderate changes to the current rules for insurance coverage, and insurance in those states would get about 20-percent cheaper in 10 years. But that’s mostly because insurance wouldn’t cover as many treatments and services. And for treatments that are no longer considered essential, insurers could once again impose annual and lifetime limits on how much they pay for a certain drug or treatment.
  • The final option looks very similar to the health-care system before 2009. The CBO estimates that about a sixth of Americans—roughly 50 million people—live in states that would waive both those provisions. In those states, healthy people with few medical expenses could purchase cheap, skimpy plans. That would leave only very expensive plans for people who do have chronic or expensive medical conditions. “Over time,” the CBO writes, “it would become more difficult for less healthy people (including people with preexisting medical conditions) in those states to purchase insurance because their premiums would continue to increase rapidly.” The agency couldn’t even put forth a guess as to how much premiums would change in those states, since so much would depend on how healthy the individual was.

Also, the CBO predicts that a shadow market of sorts would emerge in some states: Brokers would sell insurance plans that closely matched the amount of the new tax credits included in the Republican bill. The agency notes that those plans, while affordable, won’t provide enough financial protection to be “considered insurance.”

Compared to Obamacare, premiums would get much more expensive for older people under the Republicans’ bill, even in states that didn’t apply for waivers, because insurers would be able to charge them five times more than they charge younger people. Meanwhile, especially in states that request a waiver change, premiums would go down for younger, wealthier people (as the CBO illustrates with a rather far-fetched example of 21-year-olds who make $68,200):

Estimates of individual market premiums from the CBO

So will people move to greener pastures, to a state that covers their unique medical condition or that has slightly lower premiums? If the example of Medicaid is a guide, no. Under Obamacare, some states expanded Medicaid to cover more of the working poor, and others didn’t. But research showed people didn’t move from one state to another just to obtain benefits.

Then again, the Senate is reportedly going to rewrite the bill, anyway. It remains to be seen whether their revised version would hew to the same basic ideology as the AHCA: a lot more state discretion in health care, for better or worse.