February 5, 2023

Volume XIII, Number 36

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Election 2016 Likely to Result in End of ACA as We Know It, But Employers and Plan Sponsors Should Stay Course for Now

Over the past five years or so, Republican Congressmen have repeatedly taken steps to repeal President Obama’s landmark legislative effort – the Patient Protection and Affordable Care Act (the “ACA”). However, those efforts either failed to advance in Congress or were vetoed by President Obama. Tuesday’s Presidential and Congressional election, in which Donald Trump was elected President and Republicans maintained a Congressional majority in both houses, puts the future of the ACA in jeopardy. Indeed, President-elect Trump and Congressional leaders have already confirmed that repeal of the ACA is a top priority.

Although the ACA is certainly in the crosshairs, the path to outright repeal is not so clear. Republicans have majority control in both chambers of Congress, but they do not have a filibuster-proof supermajority in the Senate. This means that unless Congress changes procedural rules, Democratic Senators can effectively block though filibuster any blanket repeal of the ACA.

So what other options do Congress and President-elect Trump have? First, Congress could invalidate many of the ACA’s revenue-related provisions through budget recollection legislation. This is not a novel approach to effect healthcare legislation – the ACA itself was a product of budget reconciliation legislation passed after Democrats lost their Senate supermajority in 2010. Budget reconciliation legislation cannot be held-up by filibuster, but the subject of the legislation must be related to revenue. Non-revenue related provisions can be struck from this type of legislation.

In 2015, the Republican-controlled Congress passed budget reconciliation legislation to invalidate many of the ACA’s revenue-related provisions. Although that legislation was vetoed by President Obama, it might be used as a template for new legislation once President-elect Trump takes office. Here are some key parts of the 2015 legislation:

  • The individual and employer mandates (and associated reporting requirements) would be repealed.

  • Expansion of Medicaid to electing States would be repealed.

  • The availability of premium and cost-sharing subsidies on the public insurance Marketplace would be repealed.

  • Taxes, such as the “Cadillac Tax”, medical device tax and increased Medicare taxes on high-earners would all be repealed.

Other ACA market reforms, such as first-dollar coverage of preventive healthcare, prohibition on preexisting condition exclusions, prohibition of annual and lifetime limits on certain benefits, and required coverage of dependents through age 26, are generally not related to revenue and probably cannot be included in budget reconciliation legislation.

Second, President-elect Trump could take immediate action to impact agency enforcement of various aspects of the ACA. For example, President-elect Trump could issue a directive to agencies to stop all enforcement of regulations currently in effect under the ACA. In addition, incoming Presidents often take immediate action to stop regulatory efforts in process. This means that proposed and pending regulations would never become effective. At the moment, regulations related to expatriate healthcare coverage and opt-out payments are currently proposed and regulations related to the Cadillac Tax are being drafted. In addition, recently proposed regulations would expand Form 5500 filing requirements to include attestations regarding compliance with the ACA. Presumably, those regulatory efforts would end.

Moreover, a significant part of the ACA’s enforcement infrastructure is found in sub-regulatory guidance – there are 34 interpretive FAQs alone – meaning that there are opportunities for the new administration to take action without significant procedural hurdles. One could surmise that the days of expansive interpretations of the ACA in sub-regulatory guidance are over and, in some cases, prior sub-regulatory guidance would be reversed.

To the extent that the ACA is limited or eliminated by these actions, there is then the question of what stands in its place. Throughout his campaign, President-elect Trump has made clear that he intends not just to repeal the ACA, but also replace it with something new. Concrete details are lacking at the moment, but the following are possible components of his replacement plan:

  • A cap on the employer deduction for health coverage provided to employees.

  • Individuals without employer-provided health coverage would receive a tax credit against the cost of coverage purchased on the individual market. The tax credit would not be an advanced premium credit, but would instead be taken in full when filing income tax returns.

  • Expansion of health savings accounts, including increased contribution limits, and improved price transparency from healthcare providers.

  • Insurance companies would be able to sell policies across state lines.

  • Provide block grants to states for Medicaid.

  • Allow consumer access to imported drugs meeting safety standards.

Ultimately, it is far too early to know exactly what President-elect Trump and the Republican-controlled Congress will do with respect to the repeal of the ACA and the enactment of new health care reform or what the impact of any of those changes will be. Even if the ACA is ultimately repealed in full or in part, it is unlikely to happen on “day one.” Therefore, at least for the time being, employers and plan sponsors should continue operating their health plans in compliance with the ACA.

© 2023 Proskauer Rose LLP. National Law Review, Volume VI, Number 315
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About this Author

Robert M Projansky, Employee Attorney, Proskauer Rose Law FIrm
Partner

Robert M. Projansky is a Partner in the Employee Benefits, Executive Compensation & ERISA Litigation Practice Center. His practice covers the full spectrum of employee benefit issues, including advising clients regarding all aspects of pension and welfare plan administration, plan investment issues, health care reform, mergers and terminations, government audits, participant communications, fiduciary responsibility matters and prohibited transactions issues.

212-969-3367
Steven Weinstein, Employee Benefits Attorney, Proskauer Rose Law Firm
Partner

Steven Weinstein is a partner in the Employee Benefits & Executive Compensation Group and co-head of the Strategic Corporate Planning Group. He has been practicing in the employee benefits field since 1984, representing clients sponsoring single employer and Taft-Hartley pension and welfare plans.

Steven advises clients in all aspects of pension plan tax qualification and plan administration, including drafting of plan documents and employee communications; providing advice relating to corporate acquisitions and mergers; and negotiating investment management agreements, trust...

212-969-3362
Damian A Myers Labor and employment law attorney proskauer rose
Senior Counsel

Damian Myers is an Associate in the Employee Benefits, Executive Compensation and ERISA Litigation Practice Center, resident in the Washington, DC office.

Damian represents public and private companies on matters related to employee benefits and executive compensation including compliance with ERISA, tax, corporate and securities laws and regulations affecting employee benefit plans, programs and arrangements. He concentrates on all aspects of compensation and employee benefit programs, including the design, implementation, administration and funding of non-qualified retirement...

202-416-6877
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