The Obama administration’s flagship health care legislation the 2010 Patient Protection and Affordable Care Act – commonly known as the Affordable Care Act (ACA), and popularly known as Obamacare – was the most significant change to the U.S. health care system since 1965 and has extended health insurance coverage to millions of Americans. But it is not without its critics. Costs of health care have continued to rise, and some have criticized the administrative burdens the new insurance requirements have placed on employers.
What changes might the new administration have in store for the U.S. health care landscape? What are the key parts of the ACA likely to be repealed or reformed, and what new provisions are likely to affect employers and employees? And, with so many uncertainties, what can businesses do to prepare?
The Political Landscape
But what does a Republican vision of U.S. health care look like? The new administration will be working through its options over the coming months, which will lead to some uncertainty for individuals and organizations alike. Outside of the Trump campaign, Speaker Paul Ryan and the Republican Party have for some time been championing their own “Better Way” plan. Some of its key tenets have also been embraced by the Trump campaign. Understanding this – along with other comments made in the run-up to the election – could provide some insight into what the health policy of the new administration may look like.
Repeal & Replace – The Immediate Picture
As we await further clarity, there are some areas that can be predicted with more confidence than others based on what is known so far, as well as based on the practicalities of implementing major changes to the U.S. health care system.
Several possibilities are outlined below, although it is important to note that at the time of writing, no specific policy positions have been confirmed by the incoming administration. Indeed, with the U.S. health care system being so complex, “it may be an exercise of amending and modifying the Affordable Care Act, rather than a true repeal and replace,” says Kerri Willis, SVP, Legal Consulting, Aon Health & Benefits.
It is possible that some parts of the ACA are more likely to be repealed than others, while there are a number of new approaches that may be introduced by the Trump administration based on past announcements:
Sections of The Affordable Care Act That Might Stay
- Banning exclusion for pre-existing conditions: The Trump campaign was vocal in its support for the popular provision that prevents insurance companies denying coverage to those with pre-existing conditions. While this helps those most in need receive health care, it can also raise the cost of coverage and will need to be funded.
- Stop-loss regulations: Stop-loss insurance is the type of insurance that protects employers against spiralling payment costs in the event an employee has a serious, long-term health condition that is nominally covered by the health insurance plan. The regulations outlined in ACA removed caps on stop-loss, putting significant pressure on stop-loss insurance carriers.
- Community ratings for premiums: This provision ensures that all policies in a given area must be priced the same, regardless of the health conditions of an applicant.
- Coverage up to age 26 on parental policies: The Trump campaign indicated that the new administration may continue to allow children and young adults up to age 26 to continue coverage on their parents’ insurance policies.
Sections of The Affordable Care Act Likely To Change
- Insurance Mandates: Under the ACA, there is a legal obligation for individuals to purchase insurance and for employers of organizations of over 50 employees to provide affordable, adequate coverage to at least 95% their full-time employees, and file 1094 and 1095 reports to demonstrate compliance. Republicans have been particularly critical of insurance mandates due to the administrative and cost burdens they place on employers, which they argue restricts business growth. Around 48% of employers rated changes to the employer mandate their priority concern when going into 2017
- The Excise Tax: The Excise Tax is a tax on high-cost health care insurance plans levied on employers, set to take effect in 2018. Businesses have complained that it limits their ability to cover their employees, and the tax has seen rare bipartisan opposition. “Unions don’t like it, employers don’t like, Republicans don’t like it, Democrats don’t like it. I think this is something we will likely see repealed,” says Willis.
What Might Be New?
Some major Trump proposals, discussed during the presidential election campaign have included:
- Paid family leave: The Democrat plan was to have 12 weeks paid family leave, paid at two-thirds of the employee’s current wages, to a cap. The Republicans instead proposed 6 weeks paid family leave, delivered through the same channels as unemployment compensation and administered in the same way. The plan would be for women only, and not for fathers or for adoptive mothers. Women would only be eligible for paid family leave if their employer does not offer its own maternity plan.
- Medical liability reform: Republicans have voiced support for reform of U.S. medical liability system – this may include caps on noneconomic damages, (or damages that can’t be quantified monetarily, like disfigurement, disability, trauma, and suffering) and loser-pays rules.
- Selling insurance across state lines: By allowing insurance providers to sell across state lines, the new administration wants to help increase competition and lower costs, as less-regulated states could in theory offer more competitive packages. “The theory of this is that reduces regulation and encourages competition by allowing carriers in states with fewer regulatory burdens to sell policies to individuals outside their states,” says Willis.
- Expanded Health Savings Accounts (HSAs): Trump has supported the expansion of HSAs, including allowing spouses to make catch-up contributions, permitting HSAs to reimburse buyers if the account is established within 60 days of incurring healthcare expenses, and expanding eligibility to groups covered by other insurance bodies, like the Indian Health Service.
- Portable Tax Credits: Portable tax credits are tax credits that allow people to offset insurance packages purchases against their tax liabilities. If the policy bought is cheaper than the credits, the new administration wants those credits to be put into an HSA.
- Association Health Plans: These plans would allow groups of employees to pool their risk and create small, community health plans.
- Block-granting aid to states: Instead of the federal government administering health financing, block-granting aid means state governments are provided with a lump sum – equivalent to the value given to that state’s Medicaid program – which they can spend to provide health care coverage.
Potential Roadblocks To Reform
“Repealing and replacing the ACA is not going to be as easy as turning off a light,” says J.D. Piro, SVP and leader of the Aon Health law group. “There was a full year of intense legislative debate on ACA. It produced a bill that ran over 1,000 pages. It spawned tens of thousands of pages of legislation, over seven years, in an intricate web of interdependent, interrelated laws, regulations mandates and subsidies. It affects employers, providers, insurers, drug manufacturers, governing programs, to name just a few. Achieving consensus on how to amend this Act is not going to be an easy task.”
And while the rollout of the ACA has not been perfect, it has also enjoyed considerable successes that it would be politically risky to jeopardize – especially with Midterm elections in two years. The uninsured rate has dropped from 15.1% in 2010 to 9.1% in 2015, for instance. “There is substantial concern about canceling coverage on 13 million people. You have to look at the impact this might have on the uninsured. Enrolees might need some transition period,” says Piro.
Furthermore, many policy positions may prove to be less workable in practice than they seemed on the campaign trail. This could be the case with selling coverage across state lines. “The practicalities of establishing networks of providers, and getting the network discount that goes along with having those provider networks, may cause problems,” says Willis.
What Do Employers Need To Know?
It’s easy to get lost in the speculation of headlines during a time of political change, and it’s important to understand and anticipate upcoming changes in the law. But it is also important for organizations to ensure that they continue to fully comply with insurance and regulatory requirements as they stand.
As employee benefits for U.S.-based organizations are regulated by federal officials, a change in administration will likely bring policy changes that impact employers. “Companies will need to understand and decipher the issues, while at the same time designing and developing strategies to succeed in the short and long term,” says John Zern, CEO, Aon Global Health & Benefits.
Employers need to be realistic about the speed of the potential change. The number of technical and legislative challenges – and the ambiguity around what will replace ACA, and when – means that for now, firms should take a business-as-usual approach to the employee insurance programs. “It’s important to keep in mind that nothing has happened yet. The ACA is still the law. Compliance is still obligatory” says Piro.
- What The 45th Presidency Could Mean For Employer’s U.S. Health Care Strategies – Aon Hewitt
- ACA Likely To Change Substantially Under Trump Administration – Society For Human Resource Management, November 11, 2016
- How Trump Can Help Medicaid – November 23, 2016
- Insurers Want Obamacare Risk Adjusted, Not Repealed – Forbes, November 6, 2016
- Republicans Aim To Start Obamacare Repeal In January – Politico, November 16, 2016
- Trump’s Obamacare: What Employers Can Expect – CFO, November 11, 2016