By Colleen Doherty, SPHR, SHRM-SCP, SVP, Compliance & Client Service, Eastern Insurance
From the day that the Patient Protection and Affordable Care Act (aka Obamacare, The Affordable Care Act, or the ACA) was signed into law back in 2010, its opponents have been vowing to repeal it. During the Obama administration, repeal was a moot point given that President Obama could veto any bill that attempted to dismantle his signature legislation. Under the new Trump administration, the repeal of the ACA is a primary objective of the new president as well as the Republican majority House and Senate. However, a full repeal of the law is highly unlikely given that Senate Democrats will most likely block any attempt to fully repeal the law.
What is an ACA opponent to do?
Instead of fully repealing the law, ACA opponents in the House and Senate will first attempt to partially repeal the law through a process known as Budget Reconciliation. Budget reconciliation is “a powerful procedural tool that allows the House and Senate to pass legislation addressing fiscal policy with a simple majority that cannot be filibustered by Senate Democrats”. 1 This process can only address fiscal policy. It cannot fully repeal the law, but it may be able to alter parts of the law that are directly tied to taxes and revenue.
In keeping with many campaign promises and at the directive of the new Trump administration, House Republicans unveiled a new plan to repeal and replace parts of the ACA on Monday, March 6th. The newly unveiled house plan still needs to pass through several committees before it can be brought to the floor of the House for a vote.
It is important to point out that this repeal and replacement plan, known presently as the “American Health Care Act” (or AHCA), has a long way to go and may never pass the committee process.
However, the AHCA is already facing some internal opposition from many conservative House Republicans because it cuts many ACA taxes, but does not replace them with new revenue to fund the proposed spending in the plan. Some of the more conservative Republicans have called the House replacement plan “Obamacare Lite” and “Obamacare 2.0” and will not be satisfied without a full repeal of the Affordable Care Act. Additionally, this plan has not been scored by the Congressional Budget Office (CBO) to determine the estimated cost of the plan. It will be difficult for lawmakers to debate the merits of the plan until the estimated costs are known.
What is in this new plan?
Many of the provisions have little or no impact on the current health care law. Remember, the newly proposed AHCA can only repeal and replace parts of the Affordable Care Act that are directly tied to taxes and revenue. One of the previous versions of this bill included removing or partially removing the tax deductibility of employer sponsored health plans. Employers will be happy to learn that that a provision was removed from the current version of the bill. The most popular provisions of the ACA — adolescents staying on parents’ plans until age 26 and no pre-existing exclusions — will remain intact. Nonetheless, many new provisions have been proposed. The following is a partial list of some of the AHCA’s proposed provisions:
- Repeal the “employer mandate”. This would mean that applicable large employers would no longer be “required” to offer health insurance or pay a penalty under federal law.
- Repeal the “individual mandate”. This would mean that individuals would no longer be required to purchase health insurance (or pay a penalty) under federal law.
- Require individuals who go without insurance for a period of 63 days or more to pay a 30% surcharge on their health insurance premium for 12 months.
- Push the implementation of the Cadillac Tax on high cost health plans off until 2025.
- Keep Medicaid expansion funding to the states for “Obamacare” subsidies for individuals through the end of 2019 and then phase these out by ultimately replacing them by new “per capita” grants from the federal government to the states.
- Replace current income based tax subsidies that help people pay for private health insurance with new subsidies that would be based on a combination of age and income.
- Remove cost-sharing subsidies that reduce co-payments, co-insurance and deductibles for people with incomes below 250% of the federal poverty level.
- Increase Health Savings Accounts maximum contribution amounts up to the out of pocket limits on high deductible health plans. It is currently $6,550 for individuals and $13,100 for families.
- Remove the prohibition of using Flexible Spending Accounts to purchase over the counter drugs.
- Remove the $2,500 maximum cap on Flexible Spending Account contributions
There are more provisions included in the AHCA, but we suspect that in order to get approved by a House vote, much of the plan will be changed. While it’s good to pay attention to these proposed changes, it’s also important to remember that this is only round one. Even if the AHCA passed the House as is, it will still likely face serious challenges from Senate Democrats.
Many elected officials from across the country are also nervous about facing primary battles if they do not get this right. Since the program has been in place for so long, it is hard to unwind and take benefits away from some of the 20 million Americans that have benefited from Obamacare. Politicians are walking a very fine line with their constituents right now. The message for most employers today is to “stay the course”. Until there is agreement on a replacement plan in both houses and among both parties, it is unlikely that employers will see much change. If our elected officials wish to remain our elected officials, they will need to weigh repeal and replace options very carefully.
1 Politico, 1/3/2017