A Preliminary Analysis of a Substitute Amendment to H.R. 3962, the Affordable Health Care for America Act

November 4, 2009

This evening, CBO released a preliminary analysis of a substitute amendment to H.R. 3962, the Affordable Health Care for America Act, proposed by Representative John Boehner, theRepublican Leader in the House of Representatives. CBO and the staff of the Joint Committee on Taxation (JCT) estimate that the amendment would reduce federal deficits by $68 billion over the 2010-2019 period; it would also slightly reduce federal budget deficits in the following decade, relative to those projected under current law, with a total effect during that decade that is in a broad range between zero and one-quarter percent of gross domestic product.

That amendment contains several provisions that are intended to increase rates of insurance coverage by reducing its costs or subsidizing its purchase, including:

  • Regulatory reforms in the small group and non-group markets, including establishing association health plans (insurance coverage that is offered to members of an association) and individual membership associations, and allowing states to establish interstate compacts with a unified regulatory structure;
  • A State Innovations grant program to provide federal payments to states that achieve specified reductions in the number of uninsured individuals or in the premiums for small group or individually purchased policies;
  • Federal funding for states to use for high-risk pools in the individual insurance market and reinsurance programs in the small group market; and
  • Changes to health savings accounts (HSAs) to allow funds in such accounts to be used to pay premiums under certain circumstances, to make net contributions to HSAs eligible for the savers tax credit, and to provide a 60-day grace period for medical expenses incurred prior to the establishment of an HSA.

CBO and JCT estimate that those provisions would increase federal budget deficits by about $8 billion over the 2010-2019 period, reducing the number of nonelderly people without health insurance by about 3 million in 2019 and leaving about 52 million nonelderly residents uninsured. The share of legal nonelderly residents with insurance coverage in 201983 percentwould be roughly in line with the current share.

Other provisions of the amendment would alter federal spending and revenues in significant ways. The key provisions include:

  • Limits on costs related to medical malpractice (tort reform), including capping noneconomic and punitive damages and making changes in the allocation of liability;
  • Requirements that the Secretary of Health and Human Services adopt and regularly update standards for electronic administrative transactions that enable electronic funds transfers, claims management processes, and verification of eligibility, among other administrative tasks;
  • Establishment of an abbreviated approval pathway for follow-on biologics (biological products that are highly similar to or interchangeable with their brand-name counterparts); and
  • An increase in funding for HHS investigations into fraud and abuses.

CBO anticipates that the combination of provisions in the amendment would reduce average private health insurance premiums per enrollee in the United States, relative to what they would be under current law-by 7 percent to 10 percent in the small group market, by 5 percent to 8 percent for individually purchased insurance, and by zero to 3 percent in the large group market. Those are averages, however, and they are subject to a great deal of uncertainty; some individuals and families in each market would see different results.