How an ACA ‘repeal now, replace later’ strategy could benefit employers
President Trump recently revived calls to repeal the Affordable Care Act without a ready replacement, a move that could offer some upsides for employer-sponsored health plans.
While employer-backed insurance is not at the center of the fight over Obamacare, experts say that rolling back some of the law’s key provisions, including the employer mandate and related reporting requirements, would be helpful for large organizations.
“Repeal now and replace later is mostly positive for employers,” says Kim Monk, managing director at Capital Alpha Partners, a policy research firm.
The strategy, which Trump highlighted in a tweet on June 30, was backed by several lawmakers, including Sens. Ben Sasse, R-Neb., and Rand Paul, R-Ky. The move is seen as an alternative, albeit an unlikely one, to the current Senate negotiations, should those ultimately flounder this summer. Lawmakers are set to pick the debate back up Monday as they return from the July 4 recess. Republicans previously considered a repeal-first strategy earlier this year.
How much benefit employers would see from a “repeal now, replace later” approach largely depends on whether conservatives could secure a complete roll back of the healthcare law, which may prove unfeasible in the current environment. Republicans are working to reform the ACA using a Senate process known as budget reconciliation, which requires just 51 votes for passage. But using that process also limits the types of changes that lawmakers can make to those that affect government spending or taxes.
Achieving a full repeal would likely require additional legislation under normal Senate rules, a difficult fight given the current makeup of the chamber and strong Democratic opposition to unwinding the ACA. Still, a clean repeal would provide employers with the greatest relief.
A central element of any Republican plan to repeal the ACA is the removal of both the individual mandate and the employer mandate. Businesses with 50-plus workers would no longer face penalties for failing to offer coverage or for offering coverage that does not meet certain minimum standards, which could save them billions of dollars annually. The CBO estimated last year that employers would face an estimated $21 billion in penalties for 2016.
One of the biggest boosts for employers would be the elimination of the Cadillac tax on high-priced health plans, set to go into effect in 2020, though currently both the House and Senate bills simply call for a delay of its implementation.
“Repealing the Cadillac tax would be a dream come true” for employers, Monk says.
Another major burden for employers under the ACA has been the law’s numerous reporting requirements tied to the employer mandate, which could be dramatically eased or removed as part of a broader repeal plan.
“Reporting requirements have been very costly and complex and time-consuming,” says Jim Klein, president of the American Benefits Council.
A full repeal of the law also would allow employers to remove certain plan features that are required under the ACA, including directives to cover dependent children until age 26, prohibitions on annual or lifetime caps and requirements around no-cost preventative services for workers. There would likely be greater variation both in plan pricing and design if the ACA were to be repealed with replacement to come later.
“If the mandates of the ACA went away and the concept of the essential health benefits list went away, there’s going to be more freedom for insurers and self-insurers to design their programs,” says Seth Safra, a partner in the employee benefits & executive compensation group at law firm Proskauer in Washington.
Christopher Beinecke, counsel in the employee benefits and executive compensation practice group at Haynes and Boone in Dallas, adds that some employers could possibly return, for example, to limited benefit offerings known as mini-med plans, a type of low-cost option that is now prohibited.
“If employers did something because they felt they had to under the ACA, they might peel some of that back,” he says.
At the same time, however, observers underscored that any changes to health plans would likely be gradual and modest system-wide, because health plans are often used to help companies attract and retain workers.
While the specific effects are more difficult to game out, it’s also possible that broader changes to the health system as part of an ACA rollback could in turn impact the employer-sponsored market. Washington-based think tank the Urban Institute, for example, has estimated that repeal without a replacement could increase the number of uninsured by 24 million by 2021, which could put upward pressure on overall system costs if people returned to using the emergency room for primary care. Those additional costs could then potentially be pushed on to employers and workers.
“That would be bad for people with employer-sponsored health insurance,” says James Gelfand, senior vice president of health policy for the ERISA Industry Committee, regarding the possibility of cost-shifting.
Still, Gelfand adds, a repeal of the ACA would offer numerous upsides for employers grappling with a host of new requirements and heightened standards under the reform law, even without a replacement plan at the ready.
“For us, repeal gets us part of the way we want to go,” he says. “Then [we hope] a replace would include some good stuff, but overall it’s not focused on us.”