Health Care: Trump Wants ACA Repeal Bill on His Desk by Late February, Starting Lengthy Process to Develop Its Replacement—Large Employers Will Need to Be on the Front Line

January 06, 2017

Making predictions in the Trumpian times in which we live is a hazardous business, but it can be safely said that the Affordable Care Act system to which large employers have grown accustomed over the past six years is likely coming to an end.  Vice President-elect Pence announced this week that the first order of business for Congress will be to "repeal and replace Obamacare," saying that the new President will sign a series of Executive Orders his first day in office, presumably to hasten the Act’s dismantling and provide transition relief during the two-to four-year period needed to develop a workable replacement.  His remarks set off the first major battle in the new Congress which will be one of the highest priorities for the Association in 2017.  And both the outgoing President and the incoming Vice President were on Capitol Hill Wednesday to launch their respective messaging wars over who will be blamed for any adverse consequences from the coming revisions to the ACA.

Two, Perhaps Three-Step Process  It is important to recognize that formulation of health care reform version 2.0 will be a two to three step process and that the second and third steps will be the most important for large employers.  ACA repeal has been a GOP rallying cry ever since the Democrats enacted the law along purely partisan lines.  Therefore, while replacing at the same time as repealing would be the more practical approach, for political reasons that does not appear to be in the cards right now.  Rather, legislation announcing the coming end of the ACA and rolling back a number of key provisions will likely be enacted in the next two to three months.  Once that step has been completed, the actual replacement phase begins, which will be the key one for large employers, and that will likely take several months or even years.  It is during this replacement phase that new and creative thinking will be necessary for large purchasers of health care.  The ideas currently on the table—premium tax credits, association health plans for small businesses, selling insurance across state lines, medical malpractice reform, expanded health savings accounts, and the like—while all having merit, won’t in and of themselves solve the underlying problems, namely the constantly rising cost of the inefficient American health care system and the declining health of its population.  Therefore, it is during this second phase that employers will need to be fully engaged.  And why a possible third step?  Because the ACA in its present form is much about who gets taxed and how in order to pay for the subsidies to cover the uninsured, the underinsured, and lower income Americans.  Tax reform is a separate GOP priority, and figuring out how to pay for the ACA’s replacement could easily get swept into the coming tax reform debate because in the end, the tax preferred treatment of health care is the tax code’s largest tax expenditure and if the 20 million people now covered by the ACA are to continue receiving coverage, someone will need to pay the bill.  Whether tax reform comes before the actual replacement phase begins or vice versa, remains to be seen.  It is possible that a tax reform bill could kick off the replacement phase with key Medicaid and Medicare reforms as well as other changes to the tax treatment of health care benefits.
Target Population and the Republicans' Dilemma  Today, there are 23 million Americans covered by the Act, 10 million through individual insurance plans in the ACA exchanges, and 13 million from the Medicaid expansion authorized by the Act.  Of that 13 million, three million are people who were previously eligible for Medicaid but who never enrolled.  Therefore, the real universe of Americans whose health care is directly affected by the debate is approximately 20 million.  At the same time, there are 177 million Americans covered by employer sponsored care, many of whom feel as if their coverage has been disrupted since enactment of the ACA and will be resistant to assuming even more of the responsibility for the costs of the 20 million.  Therefore, Republicans find themselves in a difficult position.  The $3 trillion health care sector of the economy is horrendously complex, and the GOP is struggling to reach consensus regarding what should replace the ACA.  There is a silver lining in this for large employers.  Because of the intense political pressure to come up with a replacement that would actually work over the long term, at some point there will be a receptive atmosphere for those with new and different ideas, such as those being proposed by the American Health Policy Institute and developed by the Health Transformation Alliance, which includes 38 HR Policy member companies as part of our triad strategy of dealing with health care from a coordinated government relations, research and practice approach.  At the same time, we are now on a different playing field.  Most of the reform efforts undertaken by the business community over the past several years sought improvements under existing law.  That law is coming to an end, which means a wide-open playing field and far greater opportunities.
Immediate Impact  While complete repeal is not politically possible in the "repeal" bill that will reach President Trump's desk, elimination of critical foundational elements is, and that process began this week with the Senate putting in motion a process to consider phasing out various tax and budgetary provisions on which the law relies.  That will lead to a reconciliation bill which can’t be filibustered in the Senate, but it will be subject to a number of amendments from Democrats that right now appear to be directed primarily at how pharmaceuticals are priced and the way they are purchased by the government.
Program of Work  Your health policy team comprised of both the Association and the American Health Policy Institute is in the middle of the action, and they find the fundamental shift in the policy environment since the election to be striking, opening up possibilities that the membership may not have yet adequately considered.  Our program in the coming months, therefore, will have five key components:
  1. Monitoring and reporting on the rapidly evolving legislative and regulatory developments.
  2. Engaging in the joint business community lobbying effort as the first step reconciliation process proceeds over the next two to four months.
  3. Educating the Association membership regarding potential new opportunities created by the changed political environment for consideration during the replacement phase.
  4. Reaching membership consensus on the definition of success in the development of an ACA replacement package.
  5. Pursuing a robust program to achieve that success during the replacement phase.
Realities and Opportunities of a Policy Agenda  In developing a policy agenda, there are key realities that must be kept in mind. There is widespread agreement that a significant amount of the money spent on the nation’s health care is wasteful and unnecessary.  In December, for example, the American Health Policy Institute released a study of just 35 HR Policy member companies which documented that 20 percent of their combined overall health care spend—$2 billion—was unnecessary.  Unfortunately, the health care debate inside Congress right now over covering the 20 million is not focused on those staggering numbers.  It is focused on who pays for the subsidies in the current system and how much.  That actually creates opportunities for large employers because there is no simple, politically expedient solution, since no one wants to be left holding the bag.  Eventually policymakers may be forced to address what the ACA never did—the flaws in the underlying system of how health care is delivered.  Yes, large employers will be in for a very rough ride for the next two to four years, but after years of experience struggling with health care, including the last six dealing with the Affordable Care Act, we now have a clearer idea of what a better system for providing coverage would actually look like.  Still, Congress will want to toss this Gordian knot to someone else to untie.  Heard frequently from members of Congress this past week is that state Governors need to be brought into the debate, which raises the specter of American health care going 50 different directions, raising havoc with multi-state employers.  Or, a far preferable alternative, Congress eventually may have to finally listen to employers, particularly those who spend billions on health care, something that did not occur during the development of the ACA.  That is why the Association will be working on an accelerated basis to formulate options to be pursued as Congress’ focus shifts from the initial repeal step to the replacement phase.  We will need your active involvement, and you will be receiving a series of calls to action in the coming days to begin this work.  Related to that is the work of the Health Transformation Alliance which is building programs in the areas of data analytics, pharmacy purchasing, medical networks and consumer engagement.  The Association and Institute staff will be meeting with the leadership of the Health Transformation Alliance later this month to learn more about their progress, receive their input, and determine what policy changes might benefit the HTA's work.