Association for Public Policy Analysis & Management

After lawmakers abandoned legislation to repeal and replace the Affordable Health Care Act, House Speaker Paul Ryan said, “we’re going to be living with Obamacare for the foreseeable future.” But proposals that could impede, repair, or improve the law are still possible, either through regulatory action or through legislative changes that stop short of sweeping reform. In this analysis, we estimate the effects of various changes to the Affordable Care Act (ACA) that might be implemented without fully repealing the law. Options that we consider include modifying the essential health benefits, extending tax credits to a larger share of individual market enrollees, taking steps to reduce premium costs for young adults, and altering the law’s “de minimus” actuarial values.

We estimate the effects of these changes with RAND’s COMPARE microsimulation model, an analytic tool that uses survey data, economic theory, and evidence from past experience to analyze how health care reform proposals might affect health insurance enrollment, government spending on health care, premiums, and costs to consumers. Data for the model come from the Survey of Income and Program Participation, the Medical Expenditure Panel Survey, the Kaiser Family Foundation/Health Research and Educational Trust Annual Survey of Employer Benefits, and several other sources. We assume that individuals and families make health insurance enrollment decisions by weighing the costs and benefits of available options, including the option to be uninsured. Businesses in the model make the choice to offer coverage based on workers’ preferences and other factors such as the presence of an employer mandate. The model accounts for ACA’s provisions, including the individual and employer mandates, Medicaid expansion in participating states, advance-premium tax credits, cost sharing reductions, benefit generosity requirements, and changes to health insurance rating regulations.

We find that the policies under consideration have mixed effects. Policies that extend tax credits to previously ineligible individuals, or that enhance tax credits for young adults, lead to increased enrollment, but also increase costs to the federal government. Altering the de minimus actuarial value reduces federal spending on tax credits, but the effect on enrollment is uncertain given that—for many tax-credit-eligible individuals—this policy will reduce benefit generosity without a commensurate reduction in out-of-pocket premium contributions. While our analysis of changes to the EHB is ongoing, preliminary results suggest that eliminating benefit requirements may increase insurance enrollment among some groups, but will leave others exposed to high costs for services excluded from the EHB.

Among the options considered, we find no silver bullets that would simultaneously expand coverage while reducing costs for both the federal government and consumers. Reaching agreement on which policies are best to implement requires a shared understanding of priorities, including whether society’s goal should be to expand coverage, reduce consumers’ out-of-pocket costs, or limit the effect on the federal deficit.