The recent flurry of activity around the Affordable Care Act (ACA) has many people confused about where it stands, and what the employer’s obligations are. The following summarizes the activity so far:
Legislative Repeal Activity
A popular meme suggests that the Senate voted to eliminate virtually all of the provisions of the ACA, including the ability to obtain insurance in spite of pre-existing conditions, the requirement to cover adult children up to the age of 26, etc. This is not the case.
On January 12, the U.S. Senate passed S. Con. Res. 3, a concurrent budget reconciliation resolution. The U.S. House of Representatives passed the resolution on January 13. By its terms, the resolution does not amend (or even mention) the ACA, except insofar as it establishes: (1) a deficit-neutral reserve fund for health care legislation, and (2) a reserve fund for health care legislation. Instead, the concurrent resolution instructs the Senate Finance Committee; the Senate Health, Education, Labor and Pensions Committee; the House Ways and Means Committee; and the House Energy and Commerce Committee to draft Budget Reconciliation legislation that would reduce the deficit “by not less than $1,000,000,000” and to reconcile such legislation among the respective committees no later than January 27, 2017.
The actions to which the meme refers are that the Democrats introduced various amendments to the resolution in the Senate that would have protected various provisions of the ACA from being cut as part of Budget Reconciliation. All of these amendments failed on a party line vote. However, the proposed amendments were mostly symbolic — a way of putting the Republicans on record as being opposed to popular provisions of the ACA. Legally, the votes on them had no effect; any changes to the ACA would have to come through the Budget Reconciliation Act (which has not yet been drafted, much less passed) or other legislation.
There are two practical issues facing the Republicans with respect to repeal of the ACA. First, not all repeal provisions can be included in Budget Reconciliation. Congressional rules limit Budget Reconciliation provisions to those which affect the budget. Thus, for example, the ACA provisions regarding pre-existing conditions and coverage of adult children cannot be repealed by a Budget Reconciliation Act. While they could in theory be repealed by other legislation, the Budget Reconciliation Act is the only legislation which the Democrats cannot filibuster. The Republicans do not have enough votes in the Senate to overcome a filibuster. Thus, repeal of such provisions would require the cooperation of at least some Democrats.
The second practical issue is that President Trump said in his first news conference after the election that the ACA should be repealed and replaced “essentially simultaneously.” Several Republican Senators have indicated that they are opposed to simply repealing ACA without a replacement. It is unclear whether at least some Republicans might cross party lines to oppose a bill that repealed ACA provisions without providing a replacement.
Finally, any repeal legislation is likely to have a delayed effective date on at least some of its provisions. Individuals and businesses have already obtained insurance for 2017. There is reluctance among many Republicans to have a major change become effective in 2018, the year of mid-term elections. Thus, even to the extent that repeal legislation passes, current law is likely to remain in effect for some period of time.
Legislative Replacement Activity
One of the issues with “repeal and replace” is that there is as yet no agreement on what the replacement might be. President Trump has proposed the following:
- Elimination of the individual mandate.
- Modify existing law that inhibits the sale of health insurance across state lines.
- Allow individuals to fully deduct health insurance premium payments from their tax returns.
- Allow individuals with high deductible health plans to use Health Savings Accounts (HSAs).
- Require price transparency from all healthcare providers, especially doctors and healthcare organizations like clinics and hospitals.
- Block-grant Medicaid to the states.
- Remove barriers to entry into free markets for drug providers that offer safe, reliable and cheaper products.
By contrast, before the election, Congress passed H.R. 3762, the Restoring Americans’ Healthcare Freedom Reconciliation Act of 2015, which would repeal portions of the Affordable Care Act (ACA). That Act would have eliminated the law’s mandate penalties and subsidies, including Medicaid expansion. However, it would have left several of the ACA’s market reforms in place. Insurers who sold plans either through the marketplaces or directly to consumers would still be required to:
- Provide specific benefits and amounts of coverage;
- Not deny coverage or vary premiums because of an enrollee’s health status or limit coverage because of preexisting medical conditions; and
- Vary premiums only on the basis of age, tobacco use, and geographic location.
Thus, President Trump’s proposals are rather different than those previously introduced in Congress, and it is not clear what shape future proposals might take.
The situation is further complicated by the fact that the Congressional Budget Office’s analysis of H.R. 3762 indicated that:
- 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.
- 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.
To the extent that opposition to the ACA has been grounded in a theory that the ACA has been responsible for increases in health insurance premiums, Congress might be reluctant to adopt a proposal that its own analysis suggests would lead to further substantial premium increases.
On January 20, President Trump issued an “Executive Order Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal.” The executive order directs the heads of Secretary of Health and Human Services and the “heads of all other agencies (agencies)” to exercise all authority and discretion available to them to:
- Waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the Act that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications. (The Executive Order does not mention employers as one of the categories to be protected.)
- Provide greater flexibility to States and cooperate with them in implementing healthcare programs.
- Encourage the development of a free and open market in interstate commerce for the offering of healthcare services and health insurance.
There were, however, several limitations on the effect of the Executive Order:
- The heads of the relevant agencies to whom the Executive Order is directed have not been confirmed yet.
- The order is to be implemented consistent with applicable law and subject to the availability of appropriations. Thus, the agencies cannot merely disregard the law pending repeal.
- To the extent that carrying out the directives in the order would require revision of regulations issued through notice-and-comment rulemaking, the heads of agencies must comply with the Administrative Procedure Act and other applicable statutes in considering or promulgating such regulatory revisions.
It is clear that President Trump, and the majority of Republicans in Congress, want to pass some sort of repeal of the ACA as quickly as possible. However, neither the resolution passed by Congress nor the Executive Order makes any changes in current law. Many of the provisions of the ACA would be difficult or impossible for Republicans to repeal without Democratic support. And with only a narrow majority in the Senate, it is not even clear that the votes are there for repeal before a replacement plan can be developed. Thus, for now, employers should continue to assume that they will need to comply with the ACA mandates.