CBO

JANUARY 2017

How Repealing Portions of the 

Affordable Care Act Would Affect 

Health Insurance Coverage and Premiums

A little more than a year ago, the Congressional 

Budget Office and the staff of the Joint Committee on 

Taxation (JCT) estimated the budgetary effects of 

H.R. 3762, the Restoring Americans’ Healthcare Freedom Reconciliation Act of 2015, which would repeal 

portions of the Affordable Care Act (ACA)—eliminating, 

in two steps, the law’s mandate penalties and subsidies 

but leaving the ACA’s insurance market reforms in place. 

At that time, CBO and JCT offered a partial assessment 

of how H.R. 3762 would affect health insurance coverage, but they had not estimated the changes in coverage 

or premiums that would result from leaving the market 

reforms in place while repealing the mandate penalties 

and subsidies.1

 This document—prepared at the request 

of the Senate Minority Leader, the Ranking Member of 

the Senate Committee on Finance, and the Ranking 

Member of the Senate Committee on Health, Education, 

Labor, and Pensions—provides such an estimate.

In brief, CBO and JCT estimate that enacting that 

legislation would affect insurance coverage and premiums 

primarily in these ways:

B The number of people who are uninsured would 

increase by 18 million in the first new plan year 

following enactment of the bill. Later, after the 

elimination of the ACA’s expansion of Medicaid 

eligibility and of subsidies for insurance purchased 

through the ACA marketplaces, that number would 

increase to 27 million, and then to 32 million in 

2026.

B Premiums in the nongroup market (for individual 

policies purchased through the marketplaces or 

directly from insurers) would increase by 20 percent to 

25 percent—relative to projections under current 

law—in the first new plan year following enactment. 

The increase would reach about 50 percent in the year 

following the elimination of the Medicaid expansion 

and the marketplace subsidies, and premiums would 

about double by 2026.

The ways in which individuals, employers, states, 

insurers, doctors, hospitals, and other affected parties 

would respond to the changes made by H.R. 3762 are 

all difficult to predict, so the estimates in this report are 

uncertain. But CBO and JCT have endeavored to 

1. Congressional Budget Office, letter to the Honorable Mike 

Enzi regarding the budgetary effects of H.R. 3762, the Restoring 

Americans’ Healthcare Freedom Reconciliation Act, as passed 

by the Senate on December 3, 2015 (December 11, 2015), 

www.cbo.gov/publication/51090. CBO and JCT later updated 

those budgetary estimates following enactment of the 

Consolidated Appropriations Act, 2016; see Congressional 

Budget Office, cost estimate for H.R. 3762, the Restoring 

Americans’ Healthcare Freedom Reconciliation Act, as passed 

by the Senate on December 3, 2015, and following enactment 

of the Consolidated Appropriations Act, 2016 (January 4, 2016), 

www.cbo.gov/publication/51107. The estimated effects on 

insurance coverage in that document did not substantially differ 

from those described in the letter transmitted on December 11, 

2015.
2 HOW REPEALING PORTIONS OF THE ACA WOULD AFFECT HEALTH INSURANCE COVERAGE AND PREMIUMS JANUARY 2017

CBO

develop estimates that are in the middle of the distribution of potential outcomes.

In an effort to make this information more useful, CBO 

and JCT have updated their estimates of H.R. 3762’s 

effects on health insurance coverage and premiums using 

CBO’s most recent baseline projections, which were 

released in March 2016, and adjusted the effective dates 

in the legislation to reflect an assumption that enactment 

would occur one year later.

The Restoring Americans’ Healthcare 

Freedom Reconciliation Act of 2015

H.R. 3762 would make two primary sets of changes that 

would affect insurance coverage and premiums. First, 

upon enactment, the bill would eliminate penalties associated with the requirements that most people obtain 

health insurance (also known as the individual mandate) 

and that large employers offer their employees health 

insurance that meets specified standards (also known as 

the employer mandate). Second, beginning roughly two 

years after enactment, the bill would also eliminate the 

ACA’s expansion of Medicaid eligibility and the subsidies 

available to people who purchase health insurance 

through a marketplace established by the ACA. 

H.R. 3762 also contains other provisions that would have 

smaller effects on coverage and premiums.

Importantly, H.R. 3762 would leave in place a number 

of market reforms—rules established by the ACA that 

govern certain health insurance markets. Insurers who 

sell plans either through the marketplaces or directly to 

consumers are required to:

B Provide specific benefits and amounts of coverage;

B Not deny coverage or vary premiums because of an 

enrollee’s health status or limit coverage because of 

preexisting medical conditions; and

B Vary premiums only on the basis of age, tobacco use, 

and geographic location.

Analysis of H.R. 3762 Relative to 

CBO’s March 2016 Baseline

According to CBO and JCT’s analysis, upon enactment, 

H.R. 3762 would reduce the number of people with 

insurance; and in the first new plan year, premiums in 

the nongroup market would rise and participation by 

insurers in that market would decline. Starting in the year 

following the elimination of the expansion of Medicaid 

eligibility and the marketplace subsidies, the increase in 

the number of uninsured people and premiums would be 

greater, and participation by insurers in the nongroup 

market would decline further.

Estimated Changes Before the Elimination of the 

Medicaid Expansion and Subsidies

Following enactment but before the Medicaid expansion 

and subsidies for insurance purchased through the 

marketplaces were eliminated, the effects of H.R. 3762 

on insurance coverage and premiums would stem primarily from repealing the penalties associated with the individual mandate. 

Effects on Insurance Coverage. CBO and JCT expect 

that the number of people without health insurance 

coverage would increase upon enactment of H.R. 3762 

but that the increase would be limited initially, because 

insurers would have already set their premiums for the 

current year, and many people would have already made 

their enrollment decisions for the year. Subsequently, in 

the first full plan year following enactment, by CBO and 

JCT’s estimates, about 18 million people would become 

uninsured. That increase in the uninsured population 

would consist of about 10 million fewer people with 

coverage obtained in the nongroup market, roughly 

5 million fewer people with coverage under Medicaid, 

and about 3 million fewer people with employmentbased coverage.

Most of those reductions in coverage would stem from 

repealing the penalties associated with the individual 

mandate. However, CBO and JCT also expect that insurers in some areas would leave the nongroup market in the 

first new plan year following enactment. They would be 

leaving in anticipation of further reductions in enrollment and higher average health care costs among 

enrollees who remained after the subsidies for insurance 

purchased through the marketplaces were eliminated. As 

a consequence, roughly 10 percent of the population 

would be living in an area that had no insurer participating in the nongroup market.

Effects on Premiums. According to CBO and JCT’s 

analysis, premiums in the nongroup market would be 

roughly 20 percent to 25 percent higher than under current law once insurers incorporated the effects of 

H.R. 3762’s changes into their premium pricing in the 
JANUARY 2017 HOW REPEALING PORTIONS OF THE ACA WOULD AFFECT HEALTH INSURANCE COVERAGE AND PREMIUMS 3

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first new plan year after enactment. The majority of that 

increase would stem from repealing the penalties associated with the individual mandate. Doing so would both 

reduce the number of people purchasing health insurance 

and change the mix of people with insurance—tending to 

cause smaller reductions in coverage among older and less 

healthy people with high health care costs and larger 

reductions among younger and healthier people with low 

health care costs. Thus, average health care costs among 

the people retaining coverage would be higher, and insurers would have to raise premiums in the nongroup market to cover those higher costs. Lower participation by 

insurers in the nongroup market would place further 

upward pressure on premiums because the market would 

be less competitive.

Estimated Changes After the Elimination of the 

Medicaid Expansion and Subsidies

The bill’s effects on insurance coverage and premiums 

would be greater once the repeal of the Medicaid expansion and the subsidies for insurance purchased through 

the marketplaces took effect, roughly two years after 

enactment. 

Effects on Insurance Coverage. By CBO and JCT’s estimates, enacting H.R. 3762 would increase the number 

of people without health insurance coverage by about 

27 million in the year following the elimination of the 

Medicaid expansion and marketplace subsidies and by 

32 million in 2026, relative to the number of uninsured 

people expected under current law. (The number of people without health insurance would be smaller if, in addition to the changes in H.R. 3762, the insurance market 

reforms mentioned above were also repealed. In that case, 

the increase in the number of uninsured people would be 

about 21 million in the year following the elimination of 

the Medicaid expansion and marketplace subsidies; that 

figure would rise to about 23 million in 2026.)

The estimated increase of 32 million people without coverage in 2026 is the net result of roughly 23 million fewer 

with coverage in the nongroup market and 19 million 

fewer with coverage under Medicaid, partially offset by 

an increase of about 11 million people covered by 

employment-based insurance. By CBO and JCT’s estimates, 59 million people under age 65 would be uninsured in 2026 (compared with 28 million under current 

law), representing 21 percent of people under age 65. By 

2026, fewer than 2 million people would be enrolled in 

the nongroup market, CBO and JCT estimate.

According to the agencies’ analysis, eliminating the 

mandate penalties and the subsidies while retaining the 

market reforms would destabilize the nongroup market, 

and the effect would worsen over time. The ACA’s 

changes to the rules governing the nongroup health 

insurance market work in conjunction with the mandates 

and the subsidies to increase participation in the market 

and encourage enrollment among people of different ages 

and health statuses. But eliminating the penalty for not 

having health insurance would reduce enrollment and 

raise premiums in the nongroup market. Eliminating 

subsidies for insurance purchased through the marketplaces would have the same effects because it would result 

in a large price increase for many people. Not only would 

enrollment decline, but the people who would be most 

likely to remain enrolled would tend to be less healthy 

(and therefore more willing to pay higher premiums). 

Thus, average health care costs among the people retaining coverage would be higher, and insurers would have to 

raise premiums in the nongroup market to cover those 

higher costs. CBO and JCT expect that enrollment 

would continue to drop and premiums would continue 

to increase in each subsequent year.

Leaving the ACA’s market reforms in place would limit 

insurers’ ability to use strategies that were common before 

the ACA was enacted. For example, insurers would not be 

able to vary premiums to reflect an individual’s health 

care costs or offer health insurance plans that exclude 

coverage of preexisting conditions, plans that do not 

cover certain types of benefits (such as maternity care), or 

plans with very high deductibles or very low actuarial 

value (plans paying a very low share of costs for covered 

services).

Effects on Participation by Insurers. In CBO and JCT’s 

estimation, the factors exerting upward pressure on premiums and downward pressure on enrollment in the 

nongroup market would lead to substantially reduced 

participation by insurers and enrollees in many areas. 

Prior experience in states that implemented similar 

nongroup market reforms without a mandate penalty or 

subsidies has demonstrated the potential for market 

destabilization. Several states that enacted such market 

reforms later repealed or substantially modified those 
4 HOW REPEALING PORTIONS OF THE ACA WOULD AFFECT HEALTH INSURANCE COVERAGE AND PREMIUMS JANUARY 2017

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reforms in response to increased premiums and insurers’ 

departure from the market.

After weighing the evidence from prior state-level reforms 

and input from experts and market participants, CBO 

and JCT estimate that about half of the nation’s population lives in areas that would have no insurer participating in the nongroup market in the first year after the 

repeal of the marketplace subsidies took effect, and that 

share would continue to increase, extending to about 

three-quarters of the population by 2026. That contraction of the market would most directly affect people 

without access to employment-based coverage or public 

health insurance.

Effects on Premiums. In total, as a result of reduced 

enrollment, higher average health care costs among 

remaining enrollees, and lower participation by insurers, 

CBO and JCT project that premiums in the nongroup 

market would be about 50 percent higher in the first year 

after the marketplace subsidies were eliminated—relative 

to projections under current law—and would about double by 2026.

Comparison With CBO and JCT’s 2015 

Cost Estimate

This analysis differs in a number of respects from the one 

CBO and JCT did in December 2015. In particular, the 

projected increase in the number of uninsured people is 

now greater largely because, at that time, the agencies had 

not estimated the changes in coverage from leaving the 

ACA’s insurance market reforms in place while repealing 

the mandate penalties and subsidies. Moreover, the current estimates of how H.R. 3762 would affect coverage 

are measured relative to CBO’s March 2016 baseline, 

rather than the March 2015 baseline, which was the basis 

for the earlier estimates. Those baselines differ in part 

because CBO and JCT have reduced their projections of 

the number of people with health insurance coverage 

through the marketplaces and increased their projections 

of the number of people with coverage through Medicaid 

under current law.2

Future Legislation

If the Congress considers legislation similar to H.R. 3762 

in the coming weeks, the estimated effects could differ 

from those described here. In particular, the response of 

individuals, insurers, and states would depend critically 

on the particular specifications contained in such 

legislation.

2. See Congressional Budget Office, Federal Subsidies for Health 

Insurance Coverage for People Under Age 65: 2016 to 2026

(March 2016), www.cbo.gov/publication/51385.

This document was requested by the Senate Minority 

Leader, the Ranking Member of the Senate Committee 

on Finance, and the Ranking Member of the Senate 

Committee on Health, Education, Labor, and 

Pensions. Kate Fritzsche and Sarah Masi prepared it 

with guidance from Jessica Banthin, Chad Chirico, and 

Holly Harvey and with contributions from 

Allison Percy and the staff of the Joint Committee 

on Taxation. An electronic version is available on 

CBO’s website (www.cbo.gov/publication/52371).

Keith Hall 

Director