ACA Likely to Change Substantially but Full Repeal Unlikely

Blog post

We had many calls last week from clients asking what’s going to happen next, what’s going to happen with health care reform, what impact will it have on their benefits and what do they need to know.  First, these are all my personal opinions, but I believe nothing is going to happen immediately.  We’re hearing that it’s going to take at least a year or two to implement some of the changes or get to a point where there’s consensus for some of the things being considered.  I wanted to give everyone an update and list of what we do know and what we’re hearing:

  • We have heard that the U.S. Senate would move swiftly to try to repeal the ACA.  In order to repeal and replace the ACA, there needs to be 60 votes in the Senate to overcome a Democratic filibuster.  Currently, there are 51 Republican votes, and the Democrats are sure to block any proposal.
  • We think that there will be a grand gesture of trying to repeal the ACA and then the negotiating will start with the Democrats in changing the law in ways that could attract enough Senators from both parties to meet the 60-vote threshold.  We definitely think that this is the direction in which it is going to head.
  • The Republicans, including the president-elect, support keeping some parts of the ACA that are popular, such as insurance market reforms, allowing children to stay on their parents’ plans until age 26 and the ban of pre-existing limits.
  • There are several key provisions that are likely to be targeted for elimination in the absence of full ACA repeal, such as the employer mandate, the Cadillac tax, expanding HSAs, wellness program incentives and a focus on health care costs.

Employer Mandate

  • The employer mandate requires organizations with 50 or more full-time or equivalent employees to provide ACA-compliant health coverage to their full-time employees (those working on average 30 or more hours per week) or 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 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.
  • A fallback to changing the ACA’s definition of a full-time employee entitled to employer-provided coverage currently who works 30 hours or more per week could be 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’re going to take away the benefits that were extended to the 30-40 hours people or grandfather them in going forward.
  • Many prognosticators are saying that they don’t believe that there will be a complete overhaul but certainly significant revisions to the individual and employer mandate. 
  • It’s important for everyone to remember that currently the ACA is the law of the land, and prudent employers should continue to comply with the ACA, including the play-or-pay mandate and reporting requirements that are due to employees 11 days after Mr. Trump’s inauguration.

Cadillac Tax

  • The 40% excise tax on employer-sponsored health coverage that exceeds certain benefit thresholds said to take effect in 2020 is perhaps in a category by itself since there is widespread bipartisan support for eliminating it.
  • While president-elect Trump expressed support for repeal of the 40% tax on 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.

Expanding HSAs

  • A high priority on the Republican agenda is increasing the flexibility and enhancement for health savings accounts, flexible spending accounts and health reimbursement accounts such as by allowing higher contribution levels and more options regarding how the funds can be spent.  One proposal would restore the ability to use FSAs for purchasing over-the-counter medications.
  • Trump has been a big proponent of high deductible plans and HSAs; so we expect to see legal and regulatory changes that will encourage their use.  He has proposed allowing those individuals with individual health policies to fully deduct premium payments from their tax returns just as for group plans, employers can deduct the value of premiums they pay and employees can include their share from taxable income.

Wellness Program Incentives

  • The administration is likely to address preserving or even extending wellness programs.  If the administration wants to encourage the advancement of wellness programs, they will be looking at which of those regulations help and encourage that goal and which act as disincentives.

Health Care Costs

  • Addressing the rising health care costs is the big issue for employers.  The Trump administration might support applying more broadly some of the payment and delivery reforms that have been initiated in Medicare as part of the ACA.  They’re hoping to continue and expand to complement what’s happening in the private sector, to move away from fee for service and to move to alternatives such as a comprehensive primary care model that they feel promises to be more effective and efficient.
  • There will be increased focus on transparency in doctor and hospital costs, which puts more on consumerism and supporting employees to become consumers by focusing on health care literacy issues.
  • Many feel that they’re going to have to take it on a piece-by-piece, step-by-step basis.  The days of trying to repeal everything wholesale are probably going to be over despite GOP congressional leaders saying in the immediate aftermath of the election that they want to repeal the ACA.

We certainly don’t know what’s going to happen or to the extent that the two parties will work together in reforming health care, but we do know that Donald Trump likes to negotiate things and we are confident that there will be substantial changes to the ACA as we know it today.

SIG, through our SIG University, will continue to keep you updated as we know more.  If you have any questions or need any additional information, feel free to get in touch with your account representatives.


You can also get more detail on this subject by reading our recent blog post here:

Read the full  article here.