With Reconciliation in the Rearview, What’s Next?
September 30th has come and gone, meaning that Senate Republicans can no longer rely on the budget reconciliation process to repeal or replace the Affordable Care Act (ACA) in the 2017 fiscal year. As a reminder, the budget reconciliation process would allow a change in the law to be passed with a simple majority in the Senate, instead of requiring 60 votes. During the final week of September, we saw a Hail Mary effort by Senators Lindsey Graham (R-SC) and Bill Cassidy (R-LA), who introduced a revised version of their plan to repeal and replace the ACA.
While the Graham-Cassidy bill seemed to gain traction in the Senate, it was a long shot, given that Senators Rand Paul (R-KY) and John McCain (R-AZ) voiced their opposition to the bill early on. After a partial Congressional Budget Office (CBO) score indicated that millions would lose coverage under the bill, Senator Susan Collins (R-ME) also indicated that she would not vote for the bill. This effectively killed the Graham-Cassidy bill, as it became clear that Senate Republicans (who hold the majority by a 52-48 split) would not attain the 50 votes needed (with an assumed tie-breaking vote from Vice President Pence) to pass the bill in the Senate.
Although the ability to repeal and replace the ACA with a simple majority in the Senate has virtually ended, we may still see some congressional action. Additionally, the Trump administration is going full steam ahead with executive changes to certain ACA provisions.
Now that talks of repealing and replacing the ACA have dwindled, other congressional leaders have begun to discuss ways to stabilize the ACA marketplaces and have introduced other ACA changes. For example, the Senate Health, Education, Labor and Pensions (HELP) Committee, led by Chairman Lamar Alexander (R-TN) and Ranking Member Patty Murray (D-WA), has come back to the table to discuss ways to shore up the marketplaces.
Now that the bipartisan negotiations are back on, we’ll watch to see whether senators from both sides of the aisle will support funding of the ACA’s cost-sharing reduction (CSR) payments, though Republican senators will likely demand that states be given more flexibility under the Section 1332 waiver program in exchange for the CSR payments. This waiver program would presumably allow states to choose to opt out of some ACA mandates. Discussions may also include the establishment of a federal reinsurance program based on the recommendation of state insurance commissioners during recent hearings. Although it’s unclear what will ultimately come out of the Committee, it’s important to note that it will require support from both parties.
Other Congressional members are actively at work seeking to improve the ACA through piecemeal legislation. For example, in September, bipartisan senators and House members introduced the Forty Hours Is Full Time Act and the Save American Workers Act (S. 1782 and H.R. 3798). This legislation would change the definition of full-time employment under the ACA to 40 hours per week. Additionally, just this month, bipartisan members from both legislative chambers introduced legislation to simplify employer reporting (H.R. 3919 and S. 1908).
Trump Administration Changes
As we’ve highlighted in many discussions, the Trump Administration also has the discretion to alter the parts of the ACA that are regulatory in nature. At the end of last week, the Administration released an unpublished interim final rule that allows virtually all employers to claim a religious or moral objection to the ACA’s contraceptive mandate.
This rule allows any employer to claim such a religious or moral objection, including non-closely held companies and even publicly traded companies. Doing so expands the exemption previously offered to religious entities and closely held companies. The rule also allows employees to claim a religious objection to being covered by a plan that provides coverage for contraceptives. As with many of the proposed changes to the ACA, this rule has already sparked litigation, as major women’s rights groups oppose the rule.
President Trump also released an executive order that could allow insurers to sell products across state lines, expand access to association health plans and short-term health plans, and allow individuals to use HSAs to pay their premiums. On one hand, it seems that the Trump Administration believes offering such options will allow for lower-cost coverage that will attract healthy individuals to purchase health insurance. On the other hand, critics are concerned that offering lower-cost options outside of the marketplace will actually destabilize the marketplaces, resulting in higher premiums as sicker individuals are left behind.
Essentially, the President’s control over the regulatory process means he will likely consider various ways to amend the ACA given the failure of the legislative process. However, the recent departure of HHS Secretary Tom Price only stifles these efforts and creates further complications. Finally, whether President Trump attempts to amend the ACA through executive order, the standard regulatory process or non-enforcement of key provisions, he can expect legal challenges from Democrats and key stakeholders.
Employer Takeaways – IRS Enforcement of Penalties!
Although not much has changed, it seems clear that there is bipartisan support for lifting some of the more tedious employer requirements under the ACA. Specifically, there appear to be a number of legislators on board with changing the definition of full-time employment and/or simplifying employer reporting. Changes to HSAs also seem likely, with presidential and legislative support for doing so.
Additionally, the IRS has chimed in recently, making it quite clear they expect to pursue penalties against employers for faulty health care reporting. The IRS also has indicated they will block or suspend individual tax returns which lack health care disclosures.
As always, our credentialed team continues to monitor future developments which impact employers and their benefit programs.