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The Uncertain Future of the Affordable Care Act (Benefit Minute)

Tina Bull • Jan 30th, 2017

Repeal and replace the Affordable Care Act (ACA) has been the consistent message of the Republican Party and President Trump.  Some steps have already been taken that will likely ultimately impact the ACA.   Congress is progressing with a budget resolution bill that may lead to repeal of some aspects of the ACA that relate to the federal budget (this resolution cannot remove the ACA’s market reform provisions) and the President issued an executive order directed to those agencies (HHS, DOL and Treasury) with responsibilities related to the ACA.  While neither action can fully repeal the ACA, both likely impact ACA administration and enforcement and demonstrate the clear intent of the Republican-controlled Congress and the President to follow through on their promise.  At the same time, several new Republican proposals have been offered because there is a recognition that repeal is not feasible without concurrent replacement. 

President Trump’s Executive Order

On January 20, President Trump issued his first executive order “Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal.”  While the order itself has no immediate impact on the ACA as law, the six sections of the order provide insight into President Trump’s approach towards the ACA and his vision for certain components of a replacement plan.

EB In the Weeds

A summary of the order is as follows:

Section 1 states his administration’s policy is “to seek prompt repeal of the Patient Protection and Affordable Care Act” and to “take all actions consistent with law to minimize unwarranted economic and regulatory burdens of the Act.”

Section 2 grants the Secretary of HHS and other agencies with authority to “waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the ACA 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.”

Section 3 directs the agencies to “provide greater flexibility to States and cooperate with them in implementing healthcare programs.”

Section 4 directs the agencies to “encourage the development of a free and open market in interstate commerce for the offering of healthcare services and health insurance.”

Section 5 directs the agencies to comply with the Administrative Procedure Act when revising or issuing new regulations.

Section 6 affirms that the order does not impact the function of the Office of Management and Budget and that the order will be implemented consistent with applicable law and subject to available appropriations.

Impact on Individuals, Employers and Insurers

The order does not change the structure or requirements of the ACA in the short term.  An executive order is limited in what it can accomplish directly, and President Trump’s order is of a general nature and does not alter any existing law or regulation currently in force.  While it does not reference any specific provisions of the ACA, many practitioners believe that the order may ultimately result in an easing of enforcement of the individual mandate and an indefinite suspension of ACA-mandated fees and taxes.  Its impact on employer obligations, including the employer mandate and related reporting requirements, is unclear at this time.  The order does establish a framework for use in implementing the President’s stated policy objectives and mitigating certain financial impacts of the ACA as well as encouraging agency cooperation with states in bringing relief from the regulatory burdens of the ACA.

The President’s executive order appears to focus primarily on providing financial relief from the economic burdens imposed by the ACA; however, the processes the agencies use to bring about relief must still be consistent with law and may encompass a formal regulatory process.  Once the relevant agencies have confirmed Secretaries and are fully staffed, implementation of President Trump’s policy can move forward.

Republicans Propose Replacement Plans

Republican senators have already introduced several replacement acts, neither of which appears to currently have the support of Leadership.  The Patient Freedom Act is a complex plan that takes a different approach than what has been offered in other Republican proposals. States would be given a choice of maintaining the ACA, enacting a new market-based system with design restrictions in accordance with new federal guidelines or coming up with an alternative solution without federal assistance.   Allowing states to retain the ACA appears to be an attempt at compromise intended to gain support from Democrats.

The Obamacare Replacement Act is a more traditional Republican proposal that would repeal key ACA provisions.  It would restore pre-existing condition exclusions (after a two-year transition period), equalize the tax treatment of health insurance to encourage purchase of coverage independent of employment, expand Health Savings Accounts, establish Independent Health Pools in the individual market, expand Association Health Plans and allow for interstate sale of health insurance.

Current Outlook

Since Senate Republicans do not have a 60 vote majority, they will need at least some Democratic votes to pass any repeal or replacement legislation that cannot be done through the budget reconciliation process.  At this point, Democrats in Congress are looking for the Republicans to work with them to improve the ACA, not eliminate it.  The President’s executive order may provide an opportunity for Congress to proceed at a more deliberate pace in crafting acceptable legislation while still easing certain financial burdens associated with the ACA.

In the meantime, the ACA is still the law of the land.  Employers should continue their compliance efforts (including the 2016 reporting obligation) and keep abreast of near-term changes that may occur as a result of the executive order.

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About the Author: Tina Bull, VP of Compliance Services for the Employee Benefits practice, is responsible for managing and overseeing all activities of the Compliance Services Department. She advises and assists clients with respect to health/welfare plan design, administration and communication, with focus on current benefit laws and regulations. Tina’s areas of expertise include: Internal Revenue Code and ERISA requirements for health and welfare benefit plans; Internal Revenue Code Section 125 cafeteria plan implementation and administration; COBRA administrative requirements; HIPAA administrative simplification, privacy and security compliance and benefit taxation issues. In addition to conducting internal training for employee benefits staff, she has spoken at numerous seminars on regulatory compliance issues.