What Obamacare repeal could mean for employee benefits
As Donald Trump takes the oath of office to become the 45th president of the United States of America, questions remain about what will replace the Affordable Care Act, which the new administration and Republican-led Congress have promised to repeal. Although Trump has said that he would like a new health insurance plan in place by the end of February, the details of a new plan and what might remain of the current plan continue to be a source of confusion for employers.
Trump has expressed a willingness to keep a few core elements of ACA, such as providing health coverage for pre-existing conditions and allowing adult children up to the age of 26 to remain on their parents’ health plans. On the flip side, Trump has said that his plan will eliminate the so-called Cadillac tax for high-priced health plans (the tax was slated to kick in in 2020), and remove the employer mandate as well.
This leaves a wide swath of regulations that are covered in the more than 2,000 pages of the ACA. Despite the fact that the Senate voted earlier this month to defund portions of ACA — in essence starting the process of dismantling ACA — there is no consensus on what might be in the new health plan.
“We don’t know the timing of the changes to ACA, and we don’t know what is coming in its place,” says Amy Bergner, managing director, people and organization, for PricewaterhouseCoopers.
When it comes to employer-specific provisions of the ACA, such as small-business insurance pools, employer wellness plans and HSA contribution benefits, the experts interviewed by Employee Benefit News say that while the details are up in the air, many of those provisions could remain in the new plan. Likewise, the number of consumer-directed health plans and self-insured plans could continue to rise as the new plan is put into place.
An outright repeal of the entire ACA is unlikely. According to Bergner, it would take 60 votes in the Senate to fully repeal the law, and she doubts that Democrats would join the 52 Republican Senators for repeal. Only provisions related to federal taxes and expenditures like the premium subsidies, employer and individual mandate, and Cadillac tax could be repealed via the budget reconciliation process that only requires 51 votes to pass the Senate. The caps in coverage and preventive services cannot be repealed, for example. “As long as they are in place, employers and insurers are going to have to continue to cover preventive services and not have any caps.”
Other provisions that don't impact the budget, such as the mandates for employer and individual insurance to cover preventive services and to remove coverage caps, likely cannot be repealed via this budget reconciliation process, she adds.
While there are parts of ACA that could be abolished by a simple majority vote in the Senate, there are other parts of the law that cannot be dismissed right away, says Bergner. The caps in coverage and preventive services cannot be repealed, for example. “As long as they are in place, employers and insurers are going to have to continue to cover preventive services and not have any caps.”
Congressional rules are the reason. Those items do not fall under “reconciliation” and therefore are relevant to the budget. In order to be eliminated, they have to be considered an expense or “raised revenue” for the government. According to Bergner, last year Congress passed a budget reconciliation bill and neither of those provisions was included.
Also, any new health insurance bill would have to originate from the House of Representatives because it is considered a spending bill, says James Gelfand, senior vice president health policy with ERISA Industry Committee.
That said, there could be some changes to those provisions — the incoming administration could make some changes to the contraceptive coverage rule, for example. But Bergner believes the basic premise of preventive services and not having coverage caps cannot go away immediately.
“Many employers before the ACA actually covered a lot of preventive services. If there is a repeal, many employers will keep many of the same preventive service benefits. Some may decide to jettison some, but there is an underlying rationale that it is less costly and beneficial for your workforce to have preventive care to avoid costlier illness and diseases,” Bergner says.
The fate of HSA contributions
Many people think that a new health plan could have aspects and provisions were presented in Speaker Paul Ryan’s own proposal to replace ACA, called “A Better Way Plan.” His plan is aimed at providing the insured individual with greater control over his or her healthcare. One cornerstone of this is an increase to health savings accounts.
Chatrane Birbal, senior adviser, government relations, for the Society for Human Resource Management, believes this could be a major part of the new health insurance plan. Trump’s plan, she says, could include elements from Speaker Ryan’s plan as well as the plan Vice President Mike Pence put forth during his tenure as governor of Indiana.
“From what I'm hearing, it seems like the incoming administration is in favor of an HSA-type account so I could see them expanding those provisions. I really don't foresee them limiting them based on the Republican position on healthcare and the incoming administration's [hints] that they are trying to ensure that healthcare is more consumer-driven. By supporting HSA and FSAs, [they want to] give the consumer better control of their healthcare,” Birbal says.
Though HSAs have been a favorite of Republicans in Congress for many years, Bergner says, questions remain about their effectiveness. “Do HSAs help all workers? For example, lower-income workers may not have extra cash to contribute to an HSA early in the year, and if they have an out-of-pocket health expense, the HSA may not help them,” she says. “Employers as a whole [favor] expanding contribution limits.”
Wellness programs likely to stay
Health wellness plans are likely to remain intact with the pending health plan, experts say. As Gelfand put it, “The toothpaste will not be pushed back into the tube on coverage for [wellness] services.”
Health wellness has strong bipartisan support in Congress, according to Birbal. “In the last Congress, Sen. Lamar Alexander, a chairman with jurisdiction in the healthcare area, sponsored the Senate bill supporting wellness coverage, so I definitely foresee that that program would be upheld.” She adds that the bill's sponsor indicated last year that it would pursue future action to further clarify the rules of employer-sponsored wellness programs to ensure that employers can continue to take advantage of the incentives that were included in the ACA.
Beware the Cadillac tax replacement
Despite being very unpopular among employers, the employer and individual mandates may remain on the books, though fines may be eliminated or unenforced under the new plan. That said, employers still may obey the guidelines in order to avoid bad publicity. “If the penalty is zero, would employers continue to comply? I think the answer is yes because employer are risk-averse and do not like to break the law even if breaking the law has no penalty,” says Gelfand. “It’s unlikely that employers will be flippant and stop complying.”
Also, the repeal of the Cadillac tax may be a Trojan horse for employers and politicians alike, says Gelfand. He says that if Republicans eliminate the Cadillac tax, they may replace it with a far more onerous penalty.
He explains that while the Cadillac tax takes aim at health plans that offer robust coverage, the biggest factor for these plans are location and demographics. If an employer operates in a part of the country where MRIs are expensive, or if they have an older workforce or one populated by women — who require more costly medical treatments and tests — health plans are going to be more expensive over time.
“The rates of healthcare costs are going up faster than the cap in the tax code,” says Gelfand. “Eventually every plan becomes a Cadillac plan.”
Consumer-directed healthcare plans
Consumer-directed healthcare plans have increased over the past decade and may grow under the new plan as well. “This is something we have been seeing increased over the past 10 years,” says Bergner.
Tom Miller, a resident fellow of the American Enterprise Institute who covers healthcare policy, believes that self-directed healthcare’s fate in uncertain and employers must think about their role in this issue. “There are things that could help further move the area of consumer-directed care forward more on the informational and navigational front but the current moment is more of a battle over how you can believe that someone will still continue to pay for one's healthcare. Do we just want to rearrange who is doing the paining and who is doing the gaining?” he says.
Debate of the fate of self insurance
Gelfand sees the potential for greater participation in self-insured plans. “There is a movement happening right now because of the increasing cost of healthcare. We have seen a third of people enrolled in high-deductible health plans, and I don't see that trend stopping,” Gelfand says. “If you give them a bit more flexibility, there might be a faster adoption rate.”
Bergner concedes that while there has been what she calls a “slight uptick” in employers self-insuring, she declined to predict the fate under the ACA replacement.
“Under ACA, self-insuring gave relief to taxes and fees that the insurer would pass onto employers and this also gave employers a little more control over what their plans looked like. It is too early to tell whether that trend will continue,” she says. She adds, “If insurance policies become less expensive, because fees and taxes are taken out and insurance companies can offer plans that are less costly, it might make insurers plans more attractive to employers.”
Birbal predicts that the small business insurance pool will be expanded. “I could see them trying to incentivize small employers to offer health coverage, especially since just a few weeks ago, Congress approved a bill to not make small employers subject to an ACA tax for offering HSA accounts. President Obama signed that law,” she says.
The time is when?
Although Trump has said that he wants ACA repealed and a new plan to replace it on his desk by late February, the chances of that happening are slim. Congress is not working on Inauguration Day, and the reconciliation language for the new law is due on Jan. 27. The House is working part of next week and is set to have its House Republican retreat in early February. Chatrane says this hardly gives enough time for the legislative language to be approved and the details of the new law to be put into place.
Employers will have to wait, it seems. Says Gelfand, “Employers should know within the first 100 days, but it would be nicer to know now.”