Affordable Care Act: What Lies Ahead?
The elections are now over. Donald Trump will be inaugurated into office as President on January 20. The new Congress will be sworn in in early January. Republicans will have control of both houses of Congress. This stage is thus now set for major changes in health care. The question is how far the new leadership will go (and how far it can go) in unraveling the six-year-old law that has become ingrained in the U.S. health care system.
Limitations on Legislative Power
President-elect Trump had declared throughout his campaign that he would repeal and replace the Affordable Care Act (the "ACA") when elected. However, he does not possess the power to do so alone. Changes to the law will require the engagement of Congress.
Passing a bill to overturn the ACA will require 60 votes in the Senate, which is the threshold required to stop a filibuster of any bill. Consequently, Republican efforts to retract the ACA legislation through traditional means can be thwarted by the Democrats. The Republicans will have 51 (or maybe 52) votes. That is enough for a simple majority, but fewer than needed to halt a filibuster.
However, Republicans could use the budget reconciliation process to pass changes to the ACA with fewer than 60 votes, as long as they can argue those changes affect the federal budget. Only legislation that deals with budget issues can be acted upon through the reconciliation process.
As explained by the Congressional Research Service, reconciliation bills are considered by the full House and Senate under expedited procedures. In the Senate, a reconciliation bill can pass with only a simple majority, rather than the 60 votes that are often needed for controversial legislation (because reconciliation bills are not subject to filibuster).
However, the Budget Act includes language—known as the Byrd rule, after the late Senator Robert Byrd—that allows Senators to block provisions of (or amendments to) a reconciliation bill that are determined to be “extraneous” to the bill’s basic purpose of implementing budget changes. Provisions that do not produce a change in spending or revenues, or that produce a change in spending or revenues that is “merely incidental” to the provision’s non-budgetary effects, are generally considered extraneous.
Senators may raise a parliamentary objection (i.e., a point of order) against any provision that they believe to be extraneous. If the point of order is sustained by the parliamentarian, the extraneous material is deleted. Importantly, the Budget Act requires 60 votes to waive the Byrd rule or override a ruling on a point of order under the Byrd rule.
Possible Reintroduction of 2015 Bill
Based on the principle of “we did it once, we can do it again,” Republicans may introduce legislation similar to H.R. 3762, the Restoring Americans’ Healthcare Freedom Reconciliation Act (referred to hereafter as the “2015 Bill”) as a vehicle to scale down the ACA.
The 2015 Bill was passed by Congress (House and Senate) in December 2015. As expected, President Obama vetoed the bill on January 8, 2016. The House voted to override the veto on February 2, 2016, but failed to muster the required two-thirds vote.
If reintroduced and signed into law, the 2015 Bill would serve to:
- Eliminate the penalties for failing to comply with the individual mandate;
- Eliminate the penalties associated with the employer responsibility “play-or-pay” mandate;
- Repeal the ACA’s so-called “Cadillac Tax” (i.e., the excise on high-cost employer-sponsored health coverage);
- Repeal temporarily the limits on the amount of any premium tax credit overpayment that has to be repaid to the IRS;
- Repeal the ACA’s premium tax credits and cost-sharing reductions provision;
- Repeal the tax credit for small employers with no more than 25 full-time employees;
- Reduce the tax on withdrawals from HSAs that are not used to pay for qualified medical expenses (from 20% to 10%);
- Repeal the contribution limit on health FSAs (currently $2,600);
- Allow the reimbursements of over-the-counter (OTC) medications from health FSAs, HRAs and HSAs;
- Repeal the ACA’s annual fee on manufacturers and importers of branded prescription drugs;
- Repeal the ACA’s annual fee on health insurance providers;
- Repeal the ACA’s 2.3% tax on the sale of medical devices;
- Reduce the income threshold for deducting medical expenses from 10% to 7.5%;
- Repeal the ACA’s 0.9% Medicare surtax on higher-income individuals;
- Repeal the ACA’s 10% excise tax on indoor tanning services; and
- Repeal the ACA’s 3.8% tax on the net investment income of higher-income individuals.
The 2015 Bill included different effective dates for its different provisions. Notably, the repeal of the individual mandate and the employer responsibility play-or-pay mandate would become effective retroactive to the first day of the calendar year in which it was passed. Therefore, if the reintroduced bill were to be enacted in 2017, it would become effective January 1, 2017.
In contrast, the 2015 Bill retained for two years the premium tax credits, and the subsidies paid to insurers to reduce cost-sharing for individuals who purchase coverage on the Marketplace Exchange (meaning that they would presumptively remain in effect until 2019).
The repeal of other taxes generally would have become effective on the first day of the calendar year after the legislation was enacted. Therefore, if enacted in 2017, the taxes would be rescinded effective as of January 1, 2018.
Retained ACA Provisions
The 2015 Bill did not attempt to repeal all of the provisions of the ACA. Those features of the law that were left untouched include those listed below.
- Prohibition against ban on preexisting condition exclusions;
- Requirement to offer coverage to dependents up to age 26;
- Requirement to cover preventive services without cost-sharing;
- Out-of-pocket limitations for in-network services;
- Prohibition on waiting periods in excess of 90 days;
- Prohibition on annual and lifetime dollar limits on coverage for essential health benefits;
- Requirement that plans in the individual and small-group market offer essential health benefits in 10 prescribed categories;
- Prohibition on rescissions of health coverage;
- The enhanced claims denial and external review standards; and
- Prohibition on discriminating in favor of highly compensated individuals in fully insured plans (currently not being enforced).
The reason for the retention of these components of the ACA is not necessarily because they remain in favor with the Republicans. Rather, it is more likely that because the rescission of these provisions would not produce a change in spending or revenues, the Republican-sponsors of the 2015 Bill recognized that they could not be repealed through the budget reconciliation legislative process with a simple Senate majority.
Future of Marketplace Exchanges
The 2015 Bill preserved the premium tax credit for two years. The premium tax credit is available only if an individual purchases a policy on the Marketplace Exchange. Therefore, left unsaid was that if the enacted legislation continued the premium tax credit program for two years, the Marketplace Exchanges would also continue in effect for at least two years.
Alternatives to the ACA
President-elect Trump has not provided details regarding his health care program. Although he has pledged to repeal the ACA, his more recent comments indicate that he would choose to retain some of the ACA’s more popular provisions, including the protection of individuals with preexisting conditions and continuing to require health plans to allow the coverage of dependents up to the age of 26.
However, Speaker Ryan’s “A Better Way” proposal that was released last year offers a glimpse of potential features of replacement legislation. These features could include the following:
- Allowing a refundable tax credit to help purchase health insurance in the individual market (which, of course, sounds like a premium tax credit);
- Expanding the use of health savings accounts;
- Allowing insurance carriers to sell health insurance policies across state lines;
- Allowing small businesses and individuals to band together to use new pooling mechanisms to increase their purchasing power with insurers; and
- Enacting medical malpractice liability reform.
It is too early to tell with any preciseness what the outcome will be of the political maneuvering. However, it is safe to say that there will be significant changes to health care policy. Exactly what changes will be made, and when, remains to be seen.
If I had to guess, it is not unlikely that the individual mandate and the employer responsibility play-or-pay mandate will be promptly repealed or modified. Because by the time the new Congress comes back into session in January, individuals and employers would have their insurance policies in place for 2017, it is possible that the repeal or modification will not be effective until 2018.
The premium tax credits will remain in effect through at least 2018. This is consistent with the pledge of President-elect Trump to make sure that individuals are suddenly not without access to insurance coverage.
We will wait and see.
For further information or questions regarding the scope and implications of the potential changes to the Affordable Care Act, please contact the Schwabe attorney with whom you work or Wally Miller at 541-686-3299 or email@example.com.
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