Would employers drop coverage without a mandate?

While few Republicans in Congress thus far have been able to agree on all of the elements of an Affordable Care Act replacement package to send legislation to President Trump to sign, there appears to be unanimity on one point: The employer mandate should be scrubbed.

“If a GOP proposal goes forward, a mandate repeal will be included,” predicts Arthur Tacchino, chief innovation officer at SyncStream Solutions, a provider of ACA reporting and compliance solutions. While that’s a big “if,” it behooves many employers, particularly the smaller ones, to begin thinking about how they might respond to that opportunity, he adds.

Washington-based lobbying and membership organizations representing primarily larger employers pushing for an ACA overhaul have focused on challenges like ACA’s mind-numbingly detailed reporting requirements and the future imposition of the Cadillac tax. They haven’t aimed their guns at the employer mandate per se because their members generally have always offered health benefits, even when they weren’t obligated to do so.

Mandate repeal a non-event?

Chatrane Birbal, a senior adviser for government relations at the Society for Human Resource Management, has noted that the vast majority of SHRM’s members offered health benefits pre-ACA not out of charity, but because it’s an essential requirement for attracting and retaining top talent.

And Tacchino believes that offering health benefits is “part of the DNA of being a large employer.” But the ACA radically redefined “large.” Today, by the ACA’s standards, an employer with at least 50 full-time equivalent employees is considered “large.” Yet many employers with significantly larger headcounts don’t consider themselves large, and would likely welcome the opportunity to suspend —or radically modify — their health benefit offering.

On the smaller end of the size spectrum, “if the mandate goes away, some employers will cancel coverage immediately, some will wait until the end of the year, and others will hold off on making a decision,” says Danielle Capilla, acting CEO and chief compliance officer of UBA Benefits, a benefit advisory firm.

Eligibility changes

But even employers that choose to maintain their health benefits would be relieved to say goodbye to many of the ACA’s standards, such as its 30-hours-a-week threshold for full-time status. Many if not most would revert to the traditional 40-hour standard, Capilla predicts. And they would also quickly jettison the ACA’s “monthly measurement method” and “look-back” alternative procedures for counting hours worked, in favor of a simple week-by-week calculation.

In addition, if ACA replacement legislation ultimately emerges that allows individual states to set their own standards for the affordability (for employees) and scope of essential health benefits, that too would be a game-changer for many employers. Many smaller employers in states that loosen up those ACA standards, that might otherwise have dropped health benefits entirely, might instead just offer leaner plans, Capilla says.

However, fully insured employers operating solely in states with an inclination to impose even more expansive requirements than the ACA, could find themselves in the opposite situation.

Benchmark shopping

Meanwhile, self-insured employers operating in multiple states could, instead, as they can now, use the state with the most streamlined benchmark plan to set the standard for their own health plan for employees in all states. If states are given complete freedom to set their own health plan standards, as both the House and Senate ACA replacement proposals called for, that would open up even more opportunities for “benchmark shopping.”

Logic would suggest that if Republicans in Congress are unanimous — or even nearly so — in their desire to eliminate the ACA’s employer mandate, they could simply pass legislation accomplishing that goal, sidestepping the more contentious issue of cutting Medicaid funding. But that is not possible, Tacchino notes, because under Senate rules, only healthcare legislation with direct federal budget implications can be enacted with a simple majority vote.

A stand-alone proposal to eliminate the ACA employer mandate, without any Medicaid funding or individual coverage tax subsidy elements, would be subject to filibuster. That means it would require 60 votes to overcome a filibuster and be enacted, but with a razor-thin majority in the Senate, and Democrats opposing any dismantling of the ACA, Republicans would not be able to pass a mandate repeal, Tacchino says.

While that leaves an employer mandate repeal still in question, employers would benefit from considering how they would respond if the mandate were repealed or substantially loosened, no matter what the political and legislative scenario unfolds leading to that result, experts say.

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