What We Know About the “Third Prong” of the Republicans’ Health Care Plan

Update (3/27/2017): After publication, CBO released a score for H.R. 1215 - the Protecting Access to Care Act of 2017. This blog has been updated to reflect that score.

The White House recently released an outline of the “three-prong” process to repeal and replace the Affordable Care Act (ACA or “Obamacare”). Both the Administration and GOP leadership in Congress have emphasized that American Health Care Act (AHCA) is only the first prong of health care reform; the other two prongs will consist of administrative action with the insurance market and Medicaid regulation as well as additional health care legislation outside of the AHCA.

The Administration and Congressional leadership have suggested that a full evaluation of all three prongs would result in lower premiums and higher coverage compared to the Congressional Budget Office's (CBO) score of the AHCA. Given that the Administration has not provided much information about the specific regulatory and administrative changes they are contemplating for the “second prong,” it is not possible to evaluate the potential impact. However, a review of past CBO analyses of legislation that is likely to be included in the third prong suggests that these bills will reduce the deficit, lower costs, and increase coverage by modest amounts, a conclusion shared by a number of former CBO Directors.

Congressional leadership has identified the five bills listed below as possible components of the third prong.

H.R. 1101 – The Small Business Health Fairness Act of 2017

Small businesses with few employees typically face high costs when offering employer-sponsored health insurance (ESI) and often purchase insurance from carriers certified in their state. Representative Sam Johnson (R-TX) recently introduced the Small Business Health Fairness Act of 2017 (H.R. 1101), which would allow small employers to come together to purchase health insurance through federally-certified Association Health Plans (AHPs) established by industry, professional, trade, or business associations. A 2008 CBO score (pre-ACA) determined that this legislation would lead to a nearly 600,000 net increase in coverage, a slight reduction in premiums, and increase the deficit by $220 million.

More specifically, the 2008 analysis explains that the creation of AHPs would increase ESI coverage by 600,000 in its first five years and modestly reduce federal revenue, Medicaid spending, and Medicaid coverage by reducing premiums for individuals insured by AHPs.  A 2003 CBO score (pre-ACA) of similar legislation projects that creating AHPs would cover 7.5 million people, but many of those people would have received coverage by other forms of insurance. This shift to AHPs from would increase premiums for state-regulated small group insurance, which would lower coverage by around 10,000 within the non-group market.

H.R. 372 – The Competitive Health Reform Insurance Act of 2017

Health insurance providers are currently exempt from some federal antitrust laws if they are regulated by states. The Competitive Health Reform Insurance Act of 2017 (H.R. 372), introduced by Representative Paul Gosar (R-AZ), would amend the McCarron-Ferguson Act to end this exemption and apply most federal antitrust laws to the business of health insurance. CBO found the bill would have a very small impact on premiums and would not have any significant effects on coverage or revenue.

H.R. 1313 – The Preserving Employee Wellness Programs Act of 2017

Representative Virginia Foxx (R-NC) recently introduced the Preserving Employee Wellness Programs Act of 2017 (H.R. 1313), which would keep a provision from the ACA that allows employers to create financial incentives for employees to participate in wellness programs. CBO has not provided a cost estimate for this or similar legislation.

H.R. 314 – The Health Care Choice Act of 2017

Representative Marsha Blackburn (R-TN) recently introduced the Health Care Choice Act of 2017 (H.R. 314) to allow health insurers licensed by one state to offer non-group health insurance to individuals residing in any state. In 2008 (pre-ACA), CBO scored similar legislation and found that selling across state lines would result in a 400,000 net increase in coverage and reduce the deficit by $7.4 billion over the 2010-2019 budget window.

H.R. 1215 – The Protecting Access to Care Act of 2017

Representative Steve King (R-IA) recently introduced the Protecting Access to Care Act of 2017 (H.R. 1215), which would shorten the statute of limitations for medical malpractice suits, limit liability to each party's share of responsibility, and cap non-economic damages assessed in malpractice cases at $250,000, among other things. CBO estimates that enacting this bill could reduce total health care spending by up to 0.4 percent, slightly reduce premiums for medical malpractice insurance, and reduce the deficit by nearly $50 billion over the next decade.

CBO scored similar legislation in its December 2016 Budget Options Report and found that medical malpractice reform could reduce the costs of health care spending by up to 0.5 percent and reduce the deficit by around $62 billion over the 2017 to 2026 budget window. Notably, the 2016 legislation included a cap on punitive damages from malpractice suits, which is not present in King’s legislation. We believe the absence of this cap contributes to the lower overall savings and lower deficit reduction in the 2017 version of this bill.

Estimated Budgetary and Insurance Effects of "Third Prong" Legislation

Provision  Net Effect on Deficit Net Effect on Coverage Net Effect on Premiums
H.R. 1101 – The Small Business Health Fairness Act of 2017 $220 million

(2010-2019 budget window)
600,000 Increase Reduce for non-regulated small group plans, increase for regulated small-group plans
H.R. 372 – The Competitive Health Reform Insurance Act of 2017 Negligible

(2017-2026 budget window)
Not Estimated Not significant
H.R. 314 – The Health Care Choice Act of 2017 -$7.4 billion

(2010-2019 budget window)
400,000 increase Reduce for healthy individuals, increase for sick individuals
H.R. 1215 – The Protecting Access to Care Act of 2017 -$49.8 billion

(2017-2026 budget window)
Not Estimated Likely 0.4% reduction in premiums from total costs

Source: Congressional Budget Office

Notes: Estimates are not comparable since each bill is scored over a different budget window. (-) indicates deficit reduction.


These options and other proposals included in the AHCA – such as expanding the use of Health Savings Accounts and creating a Patient and State Stability Fund – were included in a substitute to the Affordable Care Act proposed by then-Minority Leader John Boehner (R-OH) in 2009. CBO and the Joint Committee on Taxation scored Boehner’s substitute and determined that compared to a pre-ACA baseline, it would reduce the deficit by $68 billion from 2010-2019, lower average premiums by around 7 to 10 percent, and increase coverage by around 3 million. Many of the provisions in the Boehner substitute cannot be considered under reconciliation, and we are unable to determine the direct contributions of specific provisions to the overall savings of the Boehner substitute. Since this proposal was evaluated before the ACA passed (and in absence of the AHCA), some of these policies could have different effects now.

As Congressional Republicans continue developing the third prong of ACA replacement, we hope they offer legislation that puts the debt on a downward path, controls health costs, and strengthens the solvency of Medicare.