ACA Likely to Change Substantially but Full Repeal Unlikely
Employer mandate and Cadillac tax are among provisions being targeted
| By Stephen Miller, CEBS Nov 11, 2016 |
The day after Donald Trump won the U.S. presidential election, Senate Majority Leader Mitch McConnell said that the U.S. Senate would move to swiftly try to repeal the Affordable Care Act (ACA). “It’s pretty high on our agenda as you know,” the Kentucky Republican told Politico on Nov. 9. “I would be shocked if we didn’t move forward and keep our commitment to the American people.”
But there’s a hitch: advocates of “repeal and replace” of the ACA need 60 votes in the Senate to overcome a Democratic filibuster—and the Nov. 8 election didn’t put that many Republican senators in place (51 Republicans, 48 Democrats, with a runoff election to be held in Louisiana).
“Without a filibuster-proof Republican majority in the Senate, Democrats are sure to make every effort to block any proposal to fully repeal the ACA,” said Chatrane Birbal, senior advisor, government relations at the Society for Human Resource Management.
In light of that challenge, President Trump and GOP congressional leaders are expected to first make a grand gesture of trying to repeal the ACA, and then start negotiating with Democrats on changing the law in ways that can attract enough senators from both parties to pass the 60-vote threshold. Alternatively, Republicans may use the process of budget reconciliation—in which a simple Senate majority is needed to pass measures related to revenues and spending.
Much of the ACA was originally passed by Democrats in 2010 using reconciliation.
“In terms of repeal, even Republicans—including the president-elect—support keeping some parts of the ACA that are popular, such as the insurance market reforms, allowing children to stay on their parents’ plans until age 26 and the ban on pre-existing condition limits,” said Steve Wojcik, vice president, public policy at the Washington-D.C.-based National Business Group on Health, which represents employers.
That said, there are several key provisions that are likely to be targeted for elimination in the absence of full ACA repeal.
Employer Mandate
“The employer and the individual mandate are back on the table,” Wojcik said. The employer mandate requires organizations with 50 or more full-time or equivalent employees to provide ACA-compliant health care coverage to their full-time employees (those working on average 30 or more hours per week) or to pay steep penalties. The individual mandate requires all adults without insurance coverage to buy an ACA-compliant policy or pay a tax penalty.
“Philosophically, employers believe that offering benefits should be voluntary. The mandate goes against that philosophy,” Wojcik said. “But the big issue is that all of the reporting, tracking and other administrative burdens associated with implementing the employer mandate would go away without it,” and these have been an enormous and costly compliance burden for many employers.
Short of repealing the mandate, a fallback could be changing the ACA’s definition of a full-time employee entitled to employer-provided coverage—currently an employee who works 30 hours or more per week—to the more traditional definition of an employee who works 40 hours per week. If that happens, “employers will need to think about whether they are going to take away the benefits that were extended to the 30-to-40 hour people,” said Kim Buckey, vice president of compliance communications at Birmingham, Ala.-based DirectPath, a health care compliance firm.
Eliminating the mandate also would let employers choose whether to offer health benefits as they see fit, and allow them to provide a wider range of offerings including “slim-down plans for part-time employees or in industries with high turnover,” Wojcik explained. The ACA eliminated these so-called “skinny” or “lite” plans that provided low-cost coverage for basic health care but failed to insure against substantial in-patient hospitalization, for instance.
J.D. Piro, New York City-based senior vice president of consultancy Aon Hewitt’s health law group, also expects to see “if not a complete overhaul, certainly a significant revision of the individual and employer mandates.”
How likely is this? “Sixty votes could be hard,” Wojcik said. “If they want to make those changes, they’ll probably have to use the reconciliation process. But they could do it. There is a budget implication for eliminating the employer and individual mandates, as well as some of the taxes that were part of the ACA. I think it’s doable as a result of the election.”
Piro suggest that there may even be enough bipartisan agreement to avoid a nasty fight. “A lot of Democrats have indicated they might be willing to relax the employer mandate,” and some are looking at the individual mandate and whether it has failed to encourage the healthy uninsured to buy health insurance, he noted.
“Whether you have to get to reconciliation in order to beat a filibuster overlooks the fact that there might be some Democrats [in the Senate] who believe there’s a better way to promote coverage than through these mandates,” Piro said. “So we’re a long way from having to make a filibuster or reconciliation determination.”
However, “It’s certainly not too soon for employers to start thinking about the implications that repealing the employer mandate or revising the definition of full-time employees will have on their benefit strategy,” Buckey said. “Once again, there’s going to be a sea-change in employee benefits.”
In the meantime, “the ACA is still the law of the land,” advised Scott Behrens, an ERISA compliance attorney at Lockton Companies, a benefits brokerage and consultancy based in Kansas City, Mo. “Prudent employers will want to continue to comply with the ACA, including the play-or-pay mandate and reporting requirements—Forms 1095-C are due to employees 11 days after Mr. Trump’s inauguration—until formal guidance relieves them of those compliance obligations.”
Cadillac Tax
The 40-percent excise tax on employer-sponsored health coverage that exceeds certain benefit thresholds, set to take effect in 2020, “is perhaps in a category by itself since there is widespread bipartisan support for eliminating it,” Wojcik said. “Employers as well as unions and others oppose this tax as a flawed way to hold down health plan costs. Ultimately, it will just raise the cost of employer-sponsored coverage without attacking the problem, which is the continued growth in health care expenses beyond wage growth and growth of the overall economy.”
“Both Democrats and Republicans have proposed repealing the Cadillac tax,” Piro said.” The upshot: The odds are now greater that the much reviled levy will never be implemented.
But not everyone is certain the tax is dead. “While President-elect Trump expressed support for a repeal of the 40-percent tax on the campaign trail, other legislative priorities including tax reform and the impact of repeal on the federal deficit could result in further delay, modification or replacement of the excise tax,” said SHRM’s Birbal.
For instance, “the tax treatment of employer-sponsored health care benefits could come under scrutiny as lawmakers look to find ways to pay for tax reform and reduce the federal deficit,” Birbal said. Earlier this year, she noted, proposed changes in the tax treatment of employer-provided health coverage were included in the U.S. House Republican’s task force report on health care reform. Trump, however, has not indicated his support for those measures.
