How the ACA Replacement Bill Withdrawal Impacts Employers

The repeal and replacement of the Affordable Care Act (ACA) – a course of action that seemed to be inevitable with GOP-controlled legislative and executive branches – came to a halt late last month. With the U.S. House of Representatives unable to secure enough votes for the American Health Care Act (AHCA), Republican leadership pulled the legislation and canceled the vote. As a result, the ACA, the health care bill put in action by the Obama administration 7 years ago, will remain in place.

“We will be living with the ACA for the foreseeable future,” explained Rose and Kiernan Vice President Dan Colacino. “However, that doesn’t mean we will have the same ACA that exists in 2017.”

So what are the implications and how does the future of the ACA impact employers?

Because the House was unable to pass the AHCA, employers must continue to comply with the ACA and all applicable ACA provisions. Both President Trump and House Republican leadership have stated that they now intend to focus on other issues, including tax reform. Despite this, Congress may choose to pursue its own ACA repeal and replacement in the near future.

We’ve already seen some of these developments. Since the withdrawal of the AHCA, Republican leaders have introduced a new amendment to appeal to conservatives in order to pass the bill through the House. However, this amendment is not anticipated to have support from House moderates, so these efforts to settle on a plan are likely to be ongoing

In the next few months, we expect to see Phase II of the Republican plan – regulatory reform. The Departments of Treasure, Labor, and Health and Human Services, the three agencies with primary responsibility for implementation of the ACA, will each explore which regulations can be changed without accompanying legislation. Further, affiliated bills with bipartisan support are prone to resurface.  Some of these efforts, like eliminating the Cadillac tax and modifying the 30-hour work week mandate, will likely have a significant effect on employers.

Two potentially conflicting Republican positions have begun to gel, one being a philosophy of “do nothing” and Obamacare will implode by itself and the other that something needs to be done to fulfill campaign promises made last year and to prevent a total collapse, explained Colacino. The former is a position that will have significant ramifications since many believe that now that the Republicans are in power, they now own Obamacare. If it goes down, they’ll likely take the blame.  Along with that, the program is not imploding or going through a death spiral as many are saying. Some markets don’t have the multitude of carriers that others have, but states like California and New York have thriving marketplaces. What’s misleading is that many count the number of carriers by the number offering coverage through the Marketplace in spite of the fact that many carriers—Aetna being a prominent one—do offer small group coverage, just not through the Marketplace and many in the Marketplace are offering more options outside the Marketplace.

The second Republican position is more likely the one that will be pursued. Some version of the AHCA will resurface later in this session with moderate concessions to the Freedom Caucus demands. One possible scenario will tie continued funding of the Cost Sharing Reductions, the subject of a Republican lawsuit, to passage of a healthcare bill in an effort to garner some Democratic support.

Medicare is pretty much “hands off” right now due to midterm elections coming up in 2018 and the political strength of that constituency.  Medicaid is more likely the target but when and how much will depend on the tax reform proposal and how much in savings is needed to fund the tax cuts promised by the Administration.

It’s important to acknowledge that costs were going up regardless of whether Obamacare existed or not. Some of the lowest healthcare trends occurred during the late 1990’s when Bill Clinton was President and there was no health care reform in place. Some of the highest trends occurred in the 1980’s when Ronald Reagan was President and, again, there was no healthcare reform in place. Therefore, it’s hard to place blame for rising costs on the existence or non-existence of healthcare reform.

While we have a strong understanding about the future of American health care, some questions about timing and next steps remain. The current health care statute has critical flaws, ranging from raising premium costs and decreasing plan options for individuals to high compliance-related costs for employers. We anticipate bi-partisan efforts to fix these problems.

For more information on the withdrawal of the AHCA, please click here. Stay tuned for more information on what comes next for health care legislations.

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