As of this writing, the future of the Affordable Care Act (ACA) is unclear. Employers should continue to comply as usual in the short term. But, in the longer term, you may have more options regarding how to run your health care plan. Yet how much flexibility you’ll have, and precisely when you’ll be able to exercise it, remains to be determined. Let’s look at some of the broader themes taking shape.
Changes to the ACA will largely be a product of compromise in Congress. Any ambitions from the right side of the aisle will likely be constrained by the fact that certain changes, though not all, will potentially be subject to a Democratic filibuster in the Senate.
More specifically, revisions to the ACA that have tax revenue implications for the federal government could be enacted by a simple majority in each chamber of Congress through the “budget reconciliation process.” But a Senate filibuster could still block changes to many other provisions.
It would require 60 Senators to override a filibuster and send legislation to the President. But Republicans hold only a slim majority there. In December, the Republican candidate in Louisiana prevailed, so there are currently 52 Republicans and 48 Democrats (including independents that caucus with the Democrats) in the Senate.
So what’s the GOP looking to do? Both the President-elect and congressional Republicans have been vocal about their desire to “repeal and replace” the ACA. Thus, one possible scenario is that, when the new Congress convenes, it will pass — and the new President will presumably sign — legislation declaring a repeal. But many experts believe that such legislation would have a delayed effective date of perhaps three years, to after the 2018 midterm congressional elections.
The delay would give Congress sufficient time to devise a plan to replace the ACA with a new law that would retain some components of the original but bring to bear provisions acceptable to the Republican majority and sitting president. Those are likely to retain the ACA’s ban on insurers denying coverage to individuals with pre-existing medical conditions, as well as the requirement that children up to age 26 can remain on their parents’ health plans.
Why defer the deadline for a replacement law until after the midterm elections? Because the politics of health care reform are treacherous. Republican leaders would prefer to limit the risk of triggering the same anti-incumbent voter backlash that caused the Democrats to lose their majority in the House of Representatives in 2010, following the ACA’s enactment.
Yet there remains strong sentiment in Congress that the ACA shouldn’t be repealed before a complete replacement package has been crafted that’s politically palatable to both sides of the aisle. The case for this approach is that health insurance markets could implode if faced with the certainty that change will occur by a fixed date, but that the nature of such change is unknown.
Health insurance executives have pressed the point — particularly with regard to Health Insurance Marketplaces (popularly known as “exchanges”). Pricing of health care policies offered in public Marketplaces has been volatile enough when there’s been some clarity about tax subsidies available to individual purchasers. But a complete lack of clarity regarding the subsidies, which Congress could eliminate with a simple majority vote, may cause insurers to pull back even more than they already have.
Insurers have also expressed concern about the prospect of the elimination of the individual mandate. As things stand, the tax penalty ($695 or 2.5% of income above the tax return filing threshold for 2016) hasn’t sufficiently incentivized many healthy young adults to buy insurance. Elimination of the mandate would further erode coverage of these young, healthier people, driving up individual policy premiums and perhaps also impacting premiums paid by employers and employees (through cost sharing) for fully insured plans.
The path ahead
Where the dust will eventually settle is hard to say. But one could glean at least a rough idea of the path ahead from a mixture of the President-elect’s campaign promises and longstanding proposals offered by leading Republicans in Congress. During the campaign, the President-elect’s ideas for health care reform included:
- Easing consumers’ ability to buy “safe and dependable drugs from overseas,” thereby, in theory, lowering drug prices,
- Allowing any insurer to offer insurance in any state,
- Expanding Health Savings Accounts,
- Permitting individuals to deduct health care coverage premiums from their taxable incomes, and
- Requiring price transparency from all health care providers to enable consumers to shop for the best deals.
A month after the election, Senate Republicans outlined a set of principles that would guide the crafting of their ACA alternative. They posited that:
- Small businesses should have more flexibility in designing their health care benefits,
- States should have more authority than the federal government in setting health policy,
- Competition among health plans should be encouraged, and
- Patients and doctors should be “in control.”
There doesn’t appear to be a groundswell of support for removing the ACA’s “play or pay” provision. This is the requirement that applicable large employers provide a certain level of health benefits or else pay a penalty.
Apparently, Washington doesn’t expect large employers to drop health benefits entirely if given the opportunity. Thus, lawmakers may want to minimize the inevitable disruption of changing the ACA by leaving this provision alone. It is, however, more likely that the “Cadillac tax” on certain high-value health care plans, which hasn’t yet gone into effect, will be permanently repealed.
Ears and eyes
Despite the prospect of an immediate but largely symbolic repeal, the legislative process for “reforming health care reform” will likely be drawn out. In the meantime, you’ll need to continue offering health care benefits that are cost-effective, compliant with the ACA and other laws, and consistent with your total compensation philosophy. Moreover, you’ll have to keep an ear to the ground and an eye on the news to see what changes the incoming administration and new Congress will bring.