Latest Senate Repeal and Replace Effort Leaves Cadillac Tax in Place

ERISA Preemption and State Laws, Federal Health Care Reform

If there are sufficient votes for passage, the Senate will vote next week on the Graham-Cassidy ACA repeal and replace measure that, from a large employer perspective, is more significant for what it does not include than what it does.  The measure, introduced by Senators Lindsey Graham (R-SC), Bill Cassidy (R-LA), Dean Heller (R-NV), and Ron Johnson (R-WI), would:

• Provide states with block grants to replace the ACA's tax credits, Medicaid expansion money, and cost-sharing payments; 
• Give the states more regulatory flexibility;  
• Increase the contribution limits to HSAs and allow HSA dollars to be used to reimburse expenses for dependents up to age 26;
• Eliminate the penalties for violations of the ACA's individual and employer mandates; and
• Repeal the medical device tax.  

The bill faces a September 30 deadline to get 50 votes in the Senate using the fast-track reconciliation process to bypass a Democratic filibuster.  If it passes, it will then go to the House, where that body can only vote on the bill as-is, with no amendments.  Most significantly for HR Policy members, it would not:

• Delay or repeal the highly unpopular Cadillac tax, which will be imposed in 2020 unless Congress acts; or
• Contain any language to either weaken or strengthen ERISA preemption. 

The latter point is significant, since a clear result of the bill would be to provide more authority to the states.  If any state were to seek new requirements for self-insured plans, employers ability to pose an ERISA preemption challenge would remain just as strong but the likelihood of having to make such a challenge could increase.  The proposal has drawn considerable opposition, most notably from some governors whose states would receive less under revised funding formulas.  The Congressional Budget Office has indicated that it will not release a full analysis on the bill before the September 30th deadline.  Senate Majority Leader McConnell has indicated he intends to consider Graham-Cassidy on the floor next week but the vote count is still uncertain.  With all Democrats voting nay and Vice President Pence voting as a tie-breaker, Republicans can lose no more than two of their colleagues.  The Finance Committee will hold a hearing Monday with a vote possible later in the week—if Leader McConnell believes he can hold 50 colleagues together.