Repeal All Insurance Coverage Provisions of the Affordable Care Act

The federal government currently regulates and subsidizes health insurance coverage through various provisions, many of them included in the Affordable Care Act (ACA). Although the ACA has numerous other provisions as well, the following elements specifically concern insurance coverage:

• Subsidized health insurance is now available to many individual people and families, who can purchase that coverage through designated marketplaces.
• Insurers who sell plans either through the marketplaces or directly to consumers must provide specific benefits and amounts of coverage. They cannot deny coverage or vary premiums because of an enrollee’s health status, and they can vary premiums only on the basis of age, tobacco use, and geographic location.
• States are permitted but not required to expand eligibility for Medicaid to include adults whose income is up to 138 percent of the federal poverty guidelines (also called the federal poverty level), with the federal government paying nearly all of the costs for expanding Medicaid coverage to those new enrollees.
• Under a provision known as the individual mandate, most citizens of the United States (and noncitizens who are lawfully present in the country) must obtain health insurance or pay a penalty for not doing so.
• Under a provision known as the employer mandate, employers with 50 or more employees generally must either offer health insurance coverage that meets specific standards or pay a penalty for declining to do so.
• A federal excise tax is scheduled to be imposed on certain employment-based health plans with relatively high premiums.

All of those provisions have led to significant increases in the number of people with insurance coverage, but they also have been controversial, and there have been proposals to repeal some or all of them. This option, which would take effect in January 2018, would repeal all of the ACA’s insurance coverage provisions—including but not limited to the subsidies, regulations, penalties, and taxes described above. This option would not repeal the ACA entirely, however. In particular, the increases in taxes and the reductions in federal payments for Medicare and other programs resulting from other provisions of the ACA would remain in force.

This option would reduce the deficit by $1,236 billion, the Congressional Budget Office and the staff of the Joint Committee on Taxation (JCT) estimate. Those net savings would largely result from the repeal of the new subsidies for Medicaid and for plans purchased through the marketplaces (gross savings of $1,751 billion through 2026, consisting of a reduction in outlays and an increase in revenues) that would be partially offset by a repeal of penalties and taxes and by other effects (totaling $516 billion through 2026).

The largest amount of gross savings comes from reducing federal outlays for Medicaid and the Children’s Health Insurance Program ($950 billion), and the next largest comes as a result of eliminating the federal subsidies for insurance purchased through the marketplaces or a related program, the Basic Health Program ($794 billion). Because the premium subsidies for marketplace plans are structured as refundable tax credits, a portion of the savings would take the form of reduced outlays (to the extent that the credit amounts exceed enrollees’ income tax liability); the remainder would take the form of higher tax revenues.

The gross savings generated under this option would be partially offset by the effects of eliminating several of the ACA’s provisions that are projected to reduce federal deficits under current law. The elimination of those provisions would affect both revenues and outlays. Significant sources of costs include the repeal of the provisions that impose penalties on some employers ($169 billion) and uninsured people ($35 billion) and those that impose an excise tax on certain high-premium insurance plans ($79 billion). Increases in employment-based coverage stemming from a repeal would reduce revenues as well because most payments for that coverage are exempt from income and payroll taxes.

Repealing the insurance coverage provisions of the ACA also would cause large changes both in the number of people with health insurance and in the sources of that coverage. CBO and JCT estimate that this option would boost the number of people under age 65 who are uninsured by about 23 million in most years before 2026—from about 28 million under current law to about 51 million in 2026. In 2026, the number of people with employment-based coverage would increase by about 10 million, the number with coverage purchased individually (including through the marketplaces) would decrease by 14 million, and the number of people with coverage through Medicaid would decrease by 19 million.

Under this option, CBO and JCT anticipate that, on average, premiums also would be lower in the nongroup market (in which health insurance is purchased directly by people) than they are under current law. That effect would arise from reductions in the scope of benefits covered and in the share of costs covered by health insurance (resulting in a corresponding increase in out-of-pocket costs for insured people). Moreover, the people who obtained health insurance in the nongroup market would be expected to be healthier, on average, than those obtaining such coverage under current law because less healthy people could be denied coverage altogether under this option or could face substantially higher premiums that could make such coverage unaffordable.

One argument in favor of this option is that it would rescind the current-law individual mandate along with its associated penalties, which hurt some people financially. (Under that mandate, people generally must either purchase health insurance or pay a penalty.) For the reasons discussed above, premiums in the nongroup market would be lower, on average, under this option.

Another argument in favor of this option is that it is likely to increase employment-based insurance coverage for some workers, in part because the narrower choices for obtaining insurance outside the workplace would encourage employers to offer coverage and employees to take up that coverage. In addition, it would reduce costs for some employers: They would no longer be subject to a penalty if they did not offer insurance, and they would not incur the costs of reporting to the Internal Revenue Service on their employees’ insurance coverage.

An additional argument in favor of this option is that both the total number of hours worked and gross domestic product would rise. In previous work, CBO projected that the labor force would be smaller by about 2 million full-time-equivalent workers in 2025 under the ACA than it would have been in the absence of that law. Under this option, those effects would largely be reversed.

An argument against this option concerns the resulting large increases in the number of people who would end up without health insurance. On average, out-of-pocket costs in the nongroup market would rise, and the availability of affordable insurance would fall for people who are in poor health or have low income. In many cases, older people and those in poor health would be denied coverage altogether in the nongroup market. The lack of subsidies for coverage would render insurance unaffordable for many people who, under current law, could purchase nongroup coverage. Moreover, repealing the subsidies for purchases in the nongroup market would create a tax inequity: Employment-based health insurance would continue to receive favorable tax treatment; insurance bought by individual people generally would not.

Another rationale against this option is that its largest effects would fall on low-income adults who, once the Medicaid expansion was rescinded, might lose access to comprehensive health insurance. Low-income adults generally have less access to employment-based health insurance than other adults do because many of them work part time or for employers that do not offer coverage.