Last week’s election of Donald Trump as President of the United States generates new ambiguity in the already complex world of health care reform. This article shares observations about the road ahead based on the new political landscape and the concepts most likely driving the new vision of health reform. Although President-elect Donald Trump and Vice President-elect Michael Pence have not yet released a detailed proposal, each has spoken numerous times about health reform during the campaign. Those speeches and the recent appointment of Andrew Bremberg to lead the Health & Human Services transition team give us a window into policy views that President-elect Trump is likely to support. An overview of such possible health reform initiatives is outlined below.

Health Insurance Deduction

Individuals would be allowed to fully deduct their health insurance premiums. Although limited deduction for health expenses (not premiums) is currently allowed when expenses exceed a specific IRS threshold, as a general matter only people with very significant expenses see any meaningful tax relief. Expanded deduction for premiums may help spur coverage, but the deduction would also reduce federal revenue and require more tax revenue elsewhere.

Buying Health Insurance Across State Lines

Republicans have championed this idea for decades. In its simplest form, the concept would enable employers based in one state to access coverage written in another state. (For example, a New York- based employer stuck with an unwanted “small group” designation seeks to buy coverage from another state with a more desirable insurance market). On its face, this change would appear positive, but such a rule could quickly erode the viability of local markets. Network issues may also create a practical or operational barrier. There are also financial concerns about policy pricing changes based on coverage obtained in a less expensive state being used to deliver coverage in a more expensive location (for example, Missouri versus California).

Expand Medicaid

In addressing problematic aspects of the ACA, President-elect Trump has proposed expanding Medicaid grants to the states and enabling the states to cover more of the local population.

How would he fund this expansion? Anticipated offsets from approximately $11 billion now being funded by the federal government to pay for undocumented individuals who utilize federal and state governments for benefits for which they are not eligible. Although different sources measure that amount differently, immigration changes represent perhaps the most controversial and highly sensitive issues currently before Congress and real legislative change could be difficult.

Prescription Drugs

President-elect Trump has also spoken in favor of directing the FDA to immediately enact safety standards to enable prescription drug importation (buying drugs abroad is disallowed by the FDA, but often practiced via the internet). Such a change would presumably force the markets to globally adjust prescription drug pricing. Supporters of this change contend that Americans are effectively subsidizing world prescription drug costs by forcing inflated domestic prices for medication.

Health Savings Accounts

The President-elect has consistently spoken about promoting HSA usage and even made reference to the accounts in his victory speech. Andrew Bremberg, leading the HHS transition, would likely propose significantly higher contribution limits and federal “seed” contributions via tax credits (similar to the proposals he shaped for Wisconsin Governor Scott Walker in his failed presidential bid). Republicans also advocate new rules that would permit limited access to prescription drug coverage without compromising a taxpayer’s ability to fund the HSA.

Change to Employer Mandate and ACA Reporting?

Although he has emphasized ACA “repeal and replace,” Mr. Trump has not specifically discussed elimination of the employer mandate. Since he has discussed repeal of the individual mandate, not referring to the employer mandate seems conspicuously absent to some. In fact some experts speculate that if ACA is repealed, that an element of the employer mandate might survive in the “replace” version (for example, perhaps with a higher attachment threshold, such as 100 full-time employees instead of 50; or with more gentle aggregation rules to quantify the size of ALE). Therefore, at least for now, we believe employers should prudently stay the course as relates to ACA mandate compliance, certainly so long as tax penalties remain in effect.

It is unsure how any changes in the Employer Mandate will affect the reporting requirements under Sections 6055 and 6056. We recommend employers continue to track this data and file as long as this requirement remains in effect.

Cadillac Tax

Some employers in the midst of cost containment decision-making have expressed uncertainty about the election. If the law is repealed, would the Cadillac tax automatically be eliminated? It may be, but a Trump proposal to eliminate the Cadillac tax could be tied to a cap on the employer deduction of health coverage premium. Again, this possibility reflects an aspect of the proposal Andrew Bremberg floated for Scott Walker (which may resurface as Bremberg is now attached to the Trump public policy team).

Proposals similar to this cap have periodically appeared in Republican health reform proposals dating back to President Reagan’s time, so there is still hope that the idea may end up tabled again.

Impact of Congressional Majority

HUB International is proud to participate as a member organization with the American Benefits Council (ABC). The ABC is the nation’s largest employee benefit employer advocacy group with years of experience tracking benefits-related developments in Washington. The ABC expressed the following insightful observations as part of a lengthier memorandum to members which we are pleased to excerpt below:

ABC Policy Observations

  • Executive Orders: President-elect Trump could issue Executive Orders to set the early agenda of his presidency and will likely rescind many Executive Orders signed by President Obama– perhaps on his first day in office. Any that have a connection to benefits (e.g. overtime rule) are likely to be included. It is common that when the White House changes hands from one party to another, the incoming Administration seeks to impose a moratorium on regulations that have not yet gone into effect. Even for those that are already in effect, the new Administration may decide to hold off on active enforcement until they have reviewed them. This could then lead to new agency regulatory rule-making to revise or completely repeal the rules. There are a plethora of such things in the benefits arena (e.g. the fiduciary rule affecting retirement plans which does not go into effect until April 2017, many ACA rules (though most are now final), paid sick leave rule for federal contractors, etc.). Of course, for many plan sponsors, plan design and operational changes have already been made and it may be more trouble than it is worth to reverse those decisions.
  • ACA Repeal: Repeal of the Affordable Care Act (ACA) is a GOP priority. Clearly, most Senate Democrats would try to block such a move. As noted above, in general a supermajority of 60 votes is needed to achieve anything controversial, in order to overcome a filibuster, and the Republicans don't have that many seats. A notable exception to the 60-vote rule is to use the budget reconciliation process. Budget bills cannot be filibustered, so a simple majority is sufficient. Indeed, the Democratically-controlled Senate used that process to help enact the ACA. There is every reason to believe a GOP-led Congress would use a budget measure as the vehicle for repeal, knowing that the Republican President would sign it. It is important to remember that Congress must first pass a budget resolution that contains a reconciliation instruction in order to utilize the budget reconciliation process.
  • Complicating Factors: There are at least two other complications. First, Republicans have effectively used against President Obama the promise that “if you like the coverage you have, you can keep it.” With millions of Americans now getting coverage under the ACA, they will need to proceed with caution on repeal so as not to be accused of taking coverage away from those Americans who have coverage in the exchanges. Second, the GOP is not likely to “repeal” unless they have a concrete proposal to “replace”; and Republicans have not reached an agreement on what that should be. In any case, even Republicans dedicated to ACA repeal recognize the need for a reasonable transition period to a new system.

Next Steps

HUB International is closely monitoring the transition of Executive power, as well as legislative leadership adjustments that may occur. We will keep all of our clients informed and prepared about all of the anticipated new developments affecting employers and their compliance burdens.

Meanwhile, we invite you to contact your HUB International representative to schedule a meeting to address any specific concerns you may have.