Now that Donald Trump has been elected president, and a Republican majority has been reelected in the House of Representatives and Senate, things that once seemed unthinkable now feel inevitable. Foremost among them: repealing the Affordable Care Act--Obamacare--which was signed into law by President Obama on March 23, 2010.
Trump has pledged to "repeal and replace" the law with a patchwork of initiatives he claims will make health care more affordable, and far less regulated, than it is today. Republicans in Congress have tried, and failed, to repeal the ACA more than 60 times. But come January 20, with a Republican president, Obamacare as we know it may be doomed.
That could bring some welcome changes for employers who've had to adapt to new rules--and additional costs--under Obamacare. But despite pledges to take action "on day one," many of these changes could take a long time to fully implement. We talked with benefits advisers and legal and health care experts about what a Trump makeover of Obamacare might really look like--so you can start preparing for it.
De Facto Repeal?
President-elect Trump can't just kill Obamacare by executive decree. It's a law, and a challenge to it that went to the Supreme Court failed. Repealing it outright would require pushing new legislation through both the Republican-controlled House and the Senate, where Republicans hold a slim majority but not enough to prevent a Democrat filibuster that would stall any such bill indefinitely.
But Trump would still have other options to let him effectively dismember Obamacare. One would be to use so-called reconciliation bills to knock out key provisions of the law if their costs are out of line with the annual congressional budget plan. Reconciliation bills can't be filibustered; they just need a simple majority vote in the Senate; as of today Republicans have 51 seats, and they're expected to pick up a 52nd when a runoff decides the victor in Louisiana.
"Which parts get repealed, I'm not sure yet, but I suspect the employer and individual mandate would be first," says Michael Bodack, president of benefits firm York International in Harrison, New York. So let's say that happens. It could still take two years for insurers to recalibrate their plans for small and medium-size employers. For example, to accommodate the ACA, insurers have changed the way they underwrite plans for individuals and small and medium-size employers, shifting from "experience" rating--where healthier people and companies get cheaper rates--to community rating, where everyone's premiums are based on a wider state pool that includes both sick and healthy people.
"The insurers built systems around the new community rating model and reduced staffing because they didn't need as many people," says Paul Ashley, an employer benefits adviser with Indianapolis's FirstPerson group. "It will take time to unwind that."
What would be "faster and more productive, but less celebrated by the folks who elected them," explains Ashley, would be Republicans pushing through legislation that tweaks the ACA in ways that have bipartisan support.
The PACE Act, for example, was a bipartisan "fix" of an obscure but unpopular provision of Obamacare that would have forced companies with 51 to 100 employees into the same insurance category as smaller companies, subjecting them to new rules and often higher rates as a result of changes in the way these plans are underwritten.
Quietly signed into law last October, the act turned it back to states, not the federal government, to decide how these companies should be categorized. Republicans could do something similar now, for example by drafting legislation to remove the so-called Cadillac Tax, an excise tax on high-value health plans. (Doing so may encourage excessive use of health care services; such plans are often an important negotiated benefit for valued employees.) It's already been delayed, and both Republicans and many Democrats have expressed a willingness to cut it. "I'd expect it go away early in the legislative process," says Ashley.
Another way Trump could cut Obamacare off at the knees is by issuing "regulatory guidance" to the federal agencies that administer the law, specifically the IRS and Department of Health and Human Services, directing them not to enforce certain provisions of the law. If the IRS, for example, doesn't collect Forms 1094 and 1095, which companies must use to report whether employees were offered health coverage, there would be no way to enforce penalties for not complying with the employer mandate. Trump could also order that the HHS halt so-called cost-sharing reduction payments to insurers that offer plans through the health care exchanges. These are direct payments to insurers meant to reduce cost sharing for people who buy certain kinds of plans through the public health exchanges, which are currently funded through a special appropriation. Once insurers stop getting the payments, they will pull plans from these markets, and further hollow out the exchanges.
Employer Coverage Will (Mostly) Continue
If the ACA's employer mandate--requiring companies with more than 50 employees to offer them health benefits--does go away, it's not likely to change what more companies are already doing, and have been doing for years. According to the Kaiser Family Foundation's 2015 Employer Survey, 92 percent of firms with 50 to 199 employees provided workers with health benefits, actually slightly down from 2010, pre-Obamacare, when 95 percent of firms this size offered coverage. The law hasn't changed what companies do. The exception: businesses with lots of low-wage workers--restaurants and hotels, for example--which traditionally were unlikely to offer workers health coverage, and would be the ones most likely to drop benefits if the mandate were eliminated or not enforced.
No Real Replacement
Creating a full-fledged replacement of a complex law like the ACA would require the same kind of painstaking work required the first time around--and it's safe to say that's not going to happen. Instead, Trump will likely talk more about allowing insurance to be sold across state lines, which could, in theory, help some small businesses--at least for a little while. If you're in a state or region with stricter mandates, or a place where an unhealthy population drives up the cost of health premiums, you could shop for plans in another, healthier state. Soon enough, though, that will turn into one great risk pool stretching across state lines, as healthy and unhealthy people get attracted to lower rates. Over time, rates will find a new, higher level, wiping out a key advantage of shopping out of state. "It's like a Ponzi scheme," says Ashley.
A Trump proposal that makes more sense is allowing people to take a standardized deduction if they buy non-employer-sponsored coverage. Yes, it's just another way of the government giving people financial incentives to get health coverage, but unlike current law, it does so without mandates or penalties, is consumer-directed, and doesn't require the vast bureaucracy of state- and federally run exchanges.
"We're now tacking in a slightly different direction," says Ashley. "Companies that plan three years out, and update each year, will continue to have the best outcomes. That doesn't change." But whether the idea of repealing Obamacare delights or disgusts you, any big changes to the health care law under a new administration are going to disrupt business as usual for employers--yet again.
"It will create confusion, more questions to answer," Ashley says. Just like, he continues, there was almost seven years ago--when, amid much fanfare, President Barack Obama signed into law a far-reaching bill that reformed health care in America.