Underneath the Rubble

As a conventional-wisdom lobbyist, I—like almost everyone else in our D.C. clan of thousands—had a very specific action plan for the historic first 100 days of President ... Hillary Clinton. 

And as much as I’d done to preserve GOP control of the U.S. Senate (thank you, CouncilPAC donors), I figured the math would result in majority leader Sen. Chuck Schumer (D-N.Y.) instead of Sen. Mitch McConnell (R-Ky.). Under either scenario of congressional and presidential control, the fate of the Affordable Care Act was going to be on the line, and our association’s highest policy calling is preservation of the employer-provided group health insurance marketplace.  Now, as I write this only a week after the election, I still am viewing things from underneath the rubble of conventional wisdom—but, already, there are some good educated guesses to make about how things are going to play out in the coming months.

The healthcare path was going to be treacherous no matter who won the presidency.  The federal and state exchanges are cratering, with average increases of 23% in the open enrollment season; a third of the country having access to only one insurer; health plans bailing left and right due to congressional choking of the “risk corridors” to compensate for adverse selection; and an ineffectual individual mandate with weak penalties. 

With control of all three levers of power—the White House, Senate and House of Representatives—Republicans must repeal and replace Obamacare. The best post-mortem election quote I’ve seen is, “The press took Donald Trump literally, but never seriously; his supporters took him seriously but never literally.”  On the subject of the Affordable Care Act, however, I believe the president and Congress seriously and literally must upend the law, and not just on the margins. The Republican Party will pay a dear price for a long, long time if they screw this up. 

When President-elect Trump met with President Obama in the Oval Office, the press had a field day on the perception that Trump was suddenly reversing himself and going wobbly on the ACA. But throughout the year, the Trump campaign supported the popular market reforms of the ACA—eliminating preexisting conditions restrictions and allowing adult children up to 26 to stay on their parents’ plans. (When the ACA was being debated, I derided the 26-and-under mandate as the “slacker provision.” But my kids were 13 and 10 then; now they’re 19 and 16 … that slacker provision is looking better to me every day.) There is an increasing recognition that those market provisions are popular and that great care must be taken in off-ramping the exchanges lest 20 million Americans lose the health insurance that they like and want to keep.

But we’ve seen this movie before when states have tried it: guaranteed issue and community rates in the absence of an effective mandate means that markets collapse. Economist Steven Pearlstein put it well in a November 12 Washington Post editorial: “There are no easy solutions here, no free lunches. You can’t have all the good parts of an unregulated insurance market (freedom to buy what you want, when you want, with market pricing) without the bad parts (steadily rising premiums and insurance that is unaffordable for people who are old and sick).” 

Figuring out the “replace” side is going to be a challenge for the new Congress and administration, with many unknowns. But much is known, insofar as the Republican Congress has already advanced a bill to repeal key provisions of the ACA to President Obama’s desk. It didn’t get a lot of attention because it was dead on arrival at the White House. The Republicans’ bill, “Restoring Americans’ Healthcare Freedom Reconciliation Act of 2015” would have:

• Restricted the federal government from operating healthcare exchanges
• Phased out funding for subsidies to help lower and middle-income individuals afford insurance through the healthcare exchanges
• Eliminated tax penalties for individuals who do not purchase health insurance and employers with 50 or more employees who do not provide insurance plans
• Eliminated taxes on medical devices and the so-called Cadillac Tax on the most expensive healthcare plans
• Phased out an expansion of Medicaid over a two-year period.

No particular surprises there, and I’d expect all of those provisions to be passed again, only this time they’ll be signed into law. Our continuous worry is that any major repeal-and-replace bill aimed at the individual market could intentionally or inadvertently undermine the employer market. Trump’s campaign platform called for building upon the employer marketplace, but decreased Medicaid reimbursement could increase cost shifting to healthcare providers. No one yet fully grasps how a proposal to allow plans to sell across state borders will work, but the assumption is that federal preemption would provide an end-around state minimum essential benefits. 

Trump also wants to extend the same tax breaks employers receive to individual Americans. This will no doubt be popular but will also be extremely expensive. The employer exclusion from taxation is the number-one tax “expenditure,” totaling $165 billion a year in lost revenue to the Treasury.  (Likewise, proposals to expand the utilization of Health Savings Accounts will be expensive.) Trump has never stated a view on limiting the employer exclusion, but a lot of prominent Republicans have. For example, Senate Finance Committee chairman Orrin Hatch (R-Utah) proposed limiting the exclusion from 100% of premiums to 85%. John McCain’s (R-Ariz.) presidential campaign plank on healthcare reform was to repeal it completely. Legislation has been introduced by conservatives in both the House and Senate to eliminate the employer-based system predicated on every American being given a refundable $2500 tax credit to purchase health insurance. 

House speaker Paul Ryan’s (R-Wis.) “Better Way” proposal released in June mentions that the GOP will consider limiting the employer tax exception for high-income wage earners. That might not be the end of the world, but everything is a slippery slope when it comes to taxing benefits. 

Reconciling all of these policy goals is going to make for a fascinating first 100 days after Trump’s inauguration. With our clients’ interest at heart (and, yes, our own), our success in 2017 will be judged on the basis of how well employers fare.