The Election and Employer Group Health Plans: What We Know Now

Votes have been cast and electors have been chosen. Donald Trump and Mike Pence will become the next President and Vice President of the United States on January 20, 2017. Republicans will also keep control of the House of Representatives and the Senate by a narrow majority.

Trump and many Republicans have vowed to repeal and replace the Patient Protection and Affordable Care Act (ACA), the healthcare reform law championed by President Obama and enacted on March 23, 2010. The results of the most recent elections have left individuals, business owners, and industry stakeholders in a cloud of uncertainty. How quickly could a repeal occur? Will the ACA be repealed altogether? Will unpopular provisions be repealed in a piecemeal fashion with other parts left intact? What would a replacement look like?

Over the past seven days, Trump and the Republicans have outlined the changes anticipated after the inauguration. Trump has also commented that he likes some provisions of the ACA.  Coverage dependents to age 26 and the ban on pre-existing condition exclusions might stick around. Right now, the only certainty is continued change and volatility. Here are the aspects of Trump’s healthcare policy to watch in the coming months:

  • Repeal and replace. With control of the White House and Congress, the Republicans have promised a swift repeal of the ACA. In fact, Trump’s position statement on healthcare reform states, “On day one of the Trump Administration, we will ask Congress to immediately deliver a full repeal of Obamacare.” However, a full repeal is unlikely, as the ACA contains dozens of provisions affecting Medicare, Medicaid, provider payments, and other components not related to the Individual Mandate or employer-sponsored group health plans. A filibuster in the Senate could frustrate attempts to push through a full repeal. Any proposal that results in the loss of federal funding for Medicaid expansion received by states represented by Republican Senators could prove politically unpopular, particularly with another congressional election cycle just two years away. Watch for a gradual dismantling of many of the most unpopular provisions of the ACA, including the Individual Mandate, Employer Mandate, and the Cadillac Tax. These repeal efforts could be accompanied by a cap on the employer deduction for employee health benefits – a move that would achieve a result similar to the Cadillac Tax and be a bitter pill to swallow for employers with high premiums due to poor claims experience.
  • Enable insurance sales across state lines. Trump promises to modify existing law to enable the sale of health insurance across state lines to promote competition and lower costs. Currently, five states already have laws on the books allowing out of state insurance sales. Seventeen other states considered similar measures but failed to enact them. Section 1333 of the ACA also contains a provision permitting two or more states to form compacts for the sale of interstate insurance. The catch? Republicans favor the sale of health insurance across state lines without the administrative hurdles of varying state benefit mandates, plan filings, and compliance with ACA coverage requirements. If successful, such a change would require buy-in from state legislatures and agencies in an area that historically has been subject to heavy state regulation. Insurance carriers also haven’t taken advantage of existing state laws permitting out of state insurance sales. Why? Certainly, the cost of additional rate filings might be a deterrent, but the difficulty and expense of developing provider networks in new geographical markets may outweigh any potential administrative savings.
  • Promote use of Health Savings Accounts (HSAs). Trump’s campaign website and post-election website each name HSAs as a major component of the new administration’s healthcare policy, but details are lacking. Trump’s campaign website asserts that HSA contributions “should be tax-free and should be allowed to accumulate.” Current IRS regulations already permit tax-free HSA contributions, accumulation, and portability of individual HSA accounts. It is not clear how or if HSA regulations might change, but the most obvious possibilities are potential increases in contribution limits, increased compatibility with FSAs, contribution of tax subsidies into HSA accounts, and relaxing current high deductible health plan requirements.
  • Deduction of individual health insurance premiums. An ACA replacement may include a provision relaxing the current restrictions on the ability of individuals to deduct health insurance premiums for individual policies on their tax returns. Now, individual health insurance premiums are tax deductible only to the extent those premiums exceed 10% of adjusted gross income. Could Trump’s plan relax these requirements? Possibly, but such a significant new tax expenditure would need to be offset somehow.  If implemented and available without eligibility restrictions, such a provision could ease the burden on middle class families who are not able to purchase coverage pre-tax through an employer, but make too much to qualify for premium tax credits under the current system.
  • Bring back state high risk pools. State high risk pools were originally established to provide subsidized coverage for high risk individuals who were not able to buy individual health insurance due to a pre-existing condition. These high risk pools were phased out once individual coverage with no pre-existing condition exclusions became available through the Health Insurance Marketplaces in 2014. Trump’s plan includes re-establishing high risk pools – a necessity if the ACA’s ban on pre-existing condition exclusions is swept up in repeal efforts.

Whatever changes may take place, they will not happen on day one of Trump’s presidency. The text of the ACA totals hundreds of pages; it’s implementing regulations amount to tens of thousands of additional pages of guidance. Typically, bills signed into law delegate a significant amount of rulemaking authority to federal agencies. The regulatory process that occurs to implement a law takes months, sometimes years, to bring a provision into effect.

This process, combined with the massive loss of coverage that would result from a full repeal, the impact on Medicare and Medicaid, balancing revenue generating provisions with a host of new tax expenditures, avoiding a filibuster by Senate Democrats, and ensuring the support of all Republican Senators may result in the cogs in the machine moving slower than Trump’s administration would like.

In the meantime, employer-sponsored group health plans must not ignore a host of other compliance obligations. ERISA’s plan document and Form 5500 requirements still apply. Breaches of sensitive health information are on the rise, and the U.S. Department of Health and Human Services continues its HIPAA enforcement efforts. New wellness program regulations under the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) are set to take effect for many plans on January 1, 2017. Reporting on Forms 1094 and 1095 has not been delayed.

The results of this election will affect employee benefits in 2017 and beyond.  Hill, Chesson & Woody is committed to leading you to the best strategy and keeping you safe during this period of change. Be assured that we are monitoring policy announcements and new developments closely. We will update you when more information is available.

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