ACA Road to Repeal: If the ACA Is on Its Way Out, What Comes Next?

Just as organizations started to get the hang of the ACA, the future of health care reform is up in the air once again. Indications show President Trump's administration is serious about repealing the ACA, including the individual and employer mandates as quickly as possible. But what happens after that remains to be seen.

Repeal

Hours after taking office, President Trump signed his first executive order instructing federal agencies to be as lenient as possible (within the constraints of existing laws) when enforcing ACA taxes, penalties and regulations. Counselor to the President Kellyanne Conway says the Trump administration would like to get rid of the ACA penalties almost immediately, Bloomberg reports.

If the legislation to repeal the ACA is similar to H.R. 3762 (a repeal bill passed in January 2016 but vetoed by President Obama), it would eliminate the individual mandate penalty (the penalty for individuals who do not maintain minimum essential health care coverage) and large employers would no longer be required to make shared responsibility payments. The tax on high cost employer-sponsored health coverage (commonly known as the "Cadillac Tax") would not apply. The H.R. 3762 bill was drafted through the reconciliation budget process, meaning that the related legislation must conform tax and spending levels to levels set in an accompanying federal budget resolution. This means a reconciliation bill can address much of the ACA (e.g. the mandates, Medicaid expansion, new taxes and subsidies), but not the entire law.

Tax Exclusion

Additional legislation will be required in addition to a reconciliation bill to replace other parts of the ACA. Replacement legislation could impact the tax exclusion for employer-sponsored insurance. In June 2016, Rep. Paul Ryan issued a white paper on health care reform called "A Better Way" providing a potential roadmap for ACA replacement. Two replacement bills have been introduced since President Trump's inauguration — the Patient Freedom Act of 2017 (PFA), introduced by Sens. Bill Cassidy (R-LA) Susan Collins (R-ME), Johnny Isaks (R-GA) and Shelly Moore Capito (R-WV), and the Obamacare Replacement Act, introduced by Sen. Rand Paul (R-KY).

The PFA doesn't directly address the tax exclusion of employer-sponsored health insurance, although it's possible they intended to do so, notes Health Affairs Blog. But the Obamacare Replacement Act evens up the tax treatment for individuals who obtain coverage on the private market and employer-based coverage, and gives a deduction on income and payroll taxes — regardless of how a person obtains health insurance, according to the bill's fact sheet. The House Republicans' plan calls for capping the tax exclusion of employer-sponsored plans.

Going forward, it appears likely that there will be some degree of change to the current tax exclusion for employer-sponsored health insurance. But it could be politically challenging for lawmakers to substantially curtail the tax exclusion, so the degree to which it will change is unclear.

HSAs

Expect more focus on HSAs in Republican health care reform plans. The Obamacare Replacement Act would entirely eliminate the contribution limit for HSAs. It would also eliminate the requirement that HSAs be funded in conjunction with a high deductible health plan (HDHP) and allow HSA contributions regardless of the type of insurance an employee has. Congress hasn't yet rallied around any particular proposal. Additional replacement legislation and plans are expected to be introduced in upcoming weeks and months, but legislation like this could give employers more flexibility in terms of contributing to employee HSAs without having to constrain employees to HDHPs.

Interstate Insurance Sales

Interstate insurance sales is another concept that appears in Republican health care reform proposals. States would likely choose to participate to varying degrees. But the Society for Human Resource Management notes that most large employer health plans are self-insured, so this provision could be less of an issue.

What is the future of health care reform? No one can say for sure what ACA replacement legislation will ultimately be enacted, and the specifics of what may be included in a replacement are still unclear, but the legislation that has been introduced thus far gives us an idea of where lawmakers could be headed.