Earlier this week, the Congressional Budget Office (CBO) published a comprehensive analysis of the American Health Care Act, which is currently being considered by the House of Representatives. While many reactions to the CBO analysis focused on how the AHCA would affect insurance coverage, the bill’s effects on individual market insurance premiums have also received considerable attention.
In its report, CBO estimated that average individual market premiums under the AHCA would be 10 percent lower in 2026 than they would be under current law (before considering subsidies). However, as some observers have noted, this estimated change incorporates changes in the generosity of the plans being offered on the individual market, as well as a shift in the composition of individual market enrollment toward younger individuals, who pay lower premiums. The CBO estimate does not, therefore, answer the question of greatest interest, which is how CBO expects the AHCA to affect average premiums for a given generosity of coverage and a fixed population of individual market enrollees.
However, other information provided in CBO’s analysis can be used to answer this question. Using that information, we estimate that premiums would be around 13 percent higher under the AHCA than they are under current law, holding plan generosity and the individual market age distribution fixed at their current law levels. As illustrated in Figure 1, around three-fifths of the difference between this estimate and the CBO estimate of a 10 percent premium decline reflects the adjustment to hold the individual market age distribution constant. The remainder reflects the adjustment to hold plan generosity constant.
It is important to note that all of the premium changes reported in this analysis reflect premiums before accounting for subsidies available to people purchasing individual market coverage. They therefore do not reflect the effects of the AHCA’s changes to those subsidies. The AHCA would cut spending on such subsidies by around half on average, with lower-income people, older people, and people in high-cost areas seeing particularly large reductions. Thus, the increase in average premiums under the AHCA would be much larger if subsidies were incorporated into the analysis.
The remainder of this analysis presents these results in greater detail and briefly discusses the reasons that the AHCA increases individual market premiums when measured on an apples-to-apples basis.