Outlook for Healthcare Legislation and Regulation After the 2018 Midterm Election (Benefit Minute)

Posted in: Benefit Minute, Employee Benefits

Healthcare was the hot topic in the 2018 midterm election as exit polls showed that approximately 40% of voters ranked it as the most important issue.  On this issue, Democrats held the advantage which allowed them to gain control of the House of Representatives by a margin of 234 to 200 (one seat still undecided).  Republicans were able to keep a majority in the Senate.

With a divided Congress, neither party will be able to pursue their own healthcare agenda and both will have to find more narrow areas of bipartisanship agreement to make any changes over the next two years.  No major legislative and regulatory initiatives related to healthcare should be expected.

The Affordable Care Act

The ACA remains the law of the land with no chance for repeal and replace.  Over the past two years, the Trump administration has taken action to erode protections of the ACA and the stability of the individual market, including:

  • Reduced funding for the Marketplace
  • Cancellation of cost-sharing reduction payments to insurers
  • Declining to defend certain provisions of the ACA in court
  • Issuance of a regulation to expand association health plans, at the expense of small group and individual markets
  • Issuance of a regulation to expand short-term health plans that are not ACA-compliant
  • Relaxing standards for state waivers, allowing access to plans that are not ACA compliant

It is expected that the administration will continue these tactics to further weaken the ACA, albeit at a slower pace since Democrats will control key House committees and exert oversight power with respect to regulations already issued and any new action taken by the administration.

Although the ACA eliminated pre-existing condition limitations in health insurance plans, recent actions by the Republican-controlled Congress and the administration, as well as a pending ACA lawsuit (see below), raised concerns that this protection for sick individuals is in jeopardy.  The same Republican members of Congress who were in favor of repealing the ACA voiced their support of preexisting condition protections on the campaign trail.  Highlighting this inconsistency was an effective midterm campaign strategy for Democrats, and the new House majority has already pledged to move swiftly to maintain that protection.  This issue could gain bipartisan support when the 116th Congress convenes.

With respect to employer-sponsored plans, the employer mandate remains and no significant action to change it is expected.  One possible area of bipartisan agreement would be further delay or full repeal of the Cadillac tax (the 40% excise tax on high cost health insurance plans).  The sticking point for full repeal remains how to replace the tax revenue that will be lost.

The most significant impact on the ACA could come when a decision is reached in Texas v. United States, the case challenging the constitutionality of the entirety of the ACA after elimination of the individual mandate penalty beginning in January 2019.  The Department of Justice has declined to defend the ACA and stated its position that only the guarantee issue and community rating provisions of the ACA (and not the entire law) should be struck down because they are so closely tied to the individual mandate.  Eliminating these provisions would end preexisting condition protection.  This case could wind up in the Supreme Court.

Prescription Drugs

In the past two years, drug manufacturers have come under fire from the administration and Congress.  There is bipartisan agreement that changes are needed, but the challenge will be gaining consensus on the specifics. Possible areas of legislation and regulation include:

  • Allowing Medicare to negotiate prices with drug manufacturers
  • Making changes to Medicare Part D catastrophic coverage for outpatient drugs
  • Banning anticompetitive practices that delay generic and biosimilar drugs from coming to market
  • Mandating greater transparency for pharmacy benefit managers
  • Changing pharmacy benefit manager rebate structures
  • Allowing drug importation from select foreign countries

State Initiatives

Healthcare legislation and regulation are also important issues at the state level and newly elected Democratic governors will likely take action to expand access to healthcare and undo federal efforts to weaken the ACA.  Such action may include:

  • State reinsurance programs to help stabilize premiums in the individual market
  • Promotion of state-based Marketplaces
  • Restrictions on association health plans and short-term health insurance
  • Implementation of individual mandate penalties at the state level (Massachusetts, New Jersey, District of Columbia and Vermont have already passed individual mandate legislation)
  • New drug pricing transparency laws

Voters in three states approved expansion of Medicaid, another bi-product of the ACA.  Additional states may also choose to expand Medicaid eligibility after Democratic gubernatorial wins.

In Conclusion

Although Americans remain divided on the ACA (one recent poll showed 53% have a generally favorable opinion), some of its benefits remain popular and difficult to roll back.  With the midterm victories achieved by Democrats, the ACA will likely remain unchanged for the next two years, and efforts by the Trump administration to weaken it will be met with strong resistance from the new Democratic majority in the House of Representatives.

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