As President-elect Trump waits to take over the helm at the White House, repealing and replacing the Affordable Care Act (ACA)—commonly referred to as Obamacare—will be a top priority for his administration. He has indicated his desire that most of Obamacare be repealed, while retaining popular provisions such as allowing children to stay on their parents’ plans until they’re 26 and forcing insurers to cover people with pre-existing conditions.
Trump wants the ACA to be replaced with something “better” based on free market principles, and with a Republican-controlled Congress behind him, it seems more likely than ever that Obamacare’s last days are fast approaching.
But a total repeal of Obamacare, at least in the near term, is much easier said than done, and full replacement with new comprehensive legislation seems highly unlikely at this point in time, given that 60 Senate votes will be needed to do so, and Democrats and Republicans appear as far apart as ever in coming to a consensus on a bipartisan strategy to move forward. Moreover, Republicans may find that it is much easier to criticize and produce legislation to repeal a less than perfect bill when they know it is ultimately not going to be signed into law, than actually producing a new law that will accomplish all that Obamacare did plus address its imperfections.
As evidence of his commitment to repeal Obamacare, Trump has tapped a key foe of the law, Representative Tom Price, who also happens to be a former physician, to be the next secretary of health and human services. Price has been actively working to dismantle Obamacare since its inception. Furthermore, House Speaker Paul Ryan has indicated that legislation to repeal Obamacare in its entirety will be introduced upon Trump’s taking office, most likely with a transitional phase-out period of a few years to buy time to get a replacement law passed and implemented.
Notwithstanding the fact that a complete repeal is unlikely due to Senate filibuster rules that would require 60 Senate votes to pass, Republicans could use the budget reconciliation process to immediately remove key revenue provisions of the law, including Medicaid expansion funding, the unpopular Cadillac tax on high-cost coverage, and the penalties for either not having or not offering health insurance, known as the individual and employer mandates, respectively.
Recent comments by Trump and Ryan, together with Ryan’s legislation that passed Congress earlier in the year (and vetoed by President Obama) and his “A Better Way” proposal, may give us clues as to what “Trumpcare” might look like.
First, there appears to be a willingness to keep certain popular but costly ACA provisions, as mentioned before. As for some of the other major insurance reform provisions in Obamacare, such as 100% coverage for preventive care services, and the removal of annual and lifetime limits, we will have to wait and see.
Other likely elements in any new legislation or program may include increasing emphasis on the use of high deductible health plans and health savings accounts (HSAs); providing consumers with greater access and more choices, including allowing health insurance to be sold across state lines and providing consumer access to imported prescription drugs; and funding Medicaid through the issuance of block grants to states. In addition, the individual and employer mandates will disappear and tax deductions would replace the premium and cost-sharing subsidies under Obamacare.
While the objectives of Trumpcare may be similar to those under Obamacare, the path to achieving these goals will most likely be quite different, with Trumpcare relying more on free market forces and less involvement by the federal government. But just as with Obamacare, attaining these objectives under Trumpcare faces many obstacles.
A new health care reform law must be able to build upon Obamacare’s efforts to expand coverage to those historically unable to obtain affordable health coverage. Although the insurance reforms under Obamacare were expensive to implement, they were successful in expanding quality health coverage to those previously without it and in greatly reducing the percentage of individuals who are uninsured in this country. Over 20 million Americans have healthcare now as a result of Obamacare, not an insignificant number. Attributing to this growth was the increase in Medicaid enrollment due to Obamacare’s expansion of the program.
We may never find out if the controls implemented under Obamacare would have worked in the long run. So now it will be Trumpcare’s turn. However, at least a couple of the proposals being considered raise some concerns regarding future success. For example, transitioning the unhealthy into high-risk pools was done prior to Obamacare with less than stellar results. In addition, the idea of expanding the use of HSAs is already well underway. While enrollment in these vehicles has been increasing, the greatest beneficiaries continue to be wealthier individuals. For those who are middle and working class, the impact has been to shift a greater burden of the cost of healthcare onto them.
We should not be fooled into thinking that any replacement comprehensive health law is going to be less costly than Obamacare if it is going to work. Properly phasing out the revenue-generating provisions under Obamacare is key to maintaining stability in the marketplace and ensuring a smooth replacement transition. Any Trumpcare law will also most likely need to incentivize the young and healthy to participate and include additional revenue-generating provisions to help offset the costs of ensuring Americans have high quality, affordable health insurance. However, these may be more unpopular than the individual mandate or universally dreaded Cadillac tax, and could potentially complicate the ability to pass meaningful legislation to fully implement a viable solution.
Insurers, brokers, consultants, employers, employees, and individuals participating in the open marketplace can all expect a bumpy ride over the next few years.
Richard P. Asensio is director of compliance at Burnham Benefits Insurance Services.