Total Benefits | Published in December 2016

The Burden of Health Care

How will Trump’s presidency affect employer-sponsored health benefits? 

By Rebecca Moore | December 2016
Art by JooHee Yoon
Health care was a major issue during President-elect Donald Trump’s campaign. In a speech about the Patient Protection and Affordable Care Act (ACA), on November 1, Trump said, “I will ask Congress to convene a special session so we can repeal and replace.”
However, the magic question, according to Garrett Fenton, member at Miller & Chevalier in Washington, D.C., is how likely is it that Trump will be able to get the law repealed? Both houses of Congress now have a Republican majority, therefore the risk of a stalemate or not getting anything passed has gone down.
Arthur Tacchino, chief innovation officer and ACA compliance expert at SyncStream, an ACA compliance solutions provider, in New Orleans, says, “It’s unlikely there will be a total repeal of the law, for one thing, because, from a legislation perspective, there would need to be a majority to sign legislation to repeal the entire law. The Republicans have made multiple attempts and never got past the Senate. It is unlikely that would change.”
It is more likely that the law will be amended or only certain provisions will be repealed, Tacchino says. “People need to understand that there is a legislative process. Lawmakers understand this law has been implemented over six years and reacts with other laws. It will take serious thoughtfulness about the impact downstream to other areas of the law and putting transition plans in place. It is highly unrealistic Trump can undo the entire law, but there are many ways in which he could work with Congress to dismantle parts of it,” he says.
Geoff Manville, principal and head of government relations for Mercer in Washington, D.C., says Republicans could use the budget reconciliation process to address some areas of the ACA, but, even so, both the House and the Senate have to agree on a plan. “That won’t be easy because there will be other contentious provisions in the budget. Even if they could pass [a budget plan], it would affect only budget-related provisions of the law,” he says. “It would be like Swiss cheese, only affecting some provisions.”
Trump’s Proposals
Since being elected, Trump has said he would not cancel the provision allowing adult children to stay covered by their parent’s benefits up to age 26, and he stated support for the pre-existing condition exclusion. “Things like that may be part of the new health care structure even with other aspects of the ACA repealed,” says Steven Friedman, a shareholder at Littler Mendelson in New York City.
Fenton says some low-hanging fruit for quick repeal include the Cadillac tax—the excise tax on high-cost health plans. “I think this was the reason the effective date for the Cadillac tax was delayed—no one liked it and it was going to be repealed.” Still, he says, that tax money, which would have financed some of the ACA’s expense, will now be lost. “It’s a lot of money someone has to pay, and its money that is hard to find. There will be a backlash if they go after the employer tax exclusion.”
He adds that the employer and individual mandates could also be ripe for repeal.
Tacchino believes Trump will certainly go after the individual mandate; “That would cut into a lot of areas of the law and disable many areas that will not work without an individual mandate.”
Trump suggested that he supported universal health care, in a speech on September 27, 2015. “I am going to take care of everybody. I don’t care if it costs me votes or not. Everybody’s going to be taken care of much better than they’re taken care of now,” he said.
“It’s unclear how committed he is to universal health care—people use different definitions of ‘universal,’” Manville says. “It remains to be seen how he fleshes out his ‘replace’ agenda. Will he insist on coverage levels near or at those of the ACA, and how will he get there?”
This past March 2, Trump released a seven-point plan for health care reform, which he described as based on “free market principles.” He stated that he would repeal Obamacare, reduce barriers to the interstate sale of health insurance, institute a full tax deduction for insurance premium payments for individuals, make health saving accounts (HSAs) inheritable, require price transparency, block-grant Medicaid to the states, and allow for more overseas drug providers through lowered regulatory barriers.
Fenton says one criticism of the ACA is that it has done too little to control health care costs. He thinks certain points in Trump’s seven-point plan would appease employers and employees who think costs are out of control—e.g., increasing competition by allowing interstate sale of health insurance and allowing for more overseas drug providers.
Fully deducting health insurance premiums will affect the individual market, rather than employers, Fenton observes, but that measure would be something Trump will have to figure out how to finance. Again, he stresses, if Trump tinkers with the employer tax exclusion, there will be controversy because that incentive is exploited by many employers.
Manville thinks requiring more transparency from providers would be great for employer plans, especially in the context of drug prices. “I would like to see real research and development costs and how drug providers are justifying their prices, especially for specialty drugs,” he says.
According to Friedman, there is a notion that expanding use of HSAs will be encouraged as a way to attack health care costs. “The employers that have already adopted HSAs have in some instances seen costs go down, and I would suspect this may be a key piece of the new administration’s plan: providing employees with money to spend on health care that they can keep in their account each year, can build up and spend when they need it,” he says. “This could have an effect of making people, for the first time, true consumers looking at prices. That could drive costs down or at least slow the cost of health inflation. I’m not saying this will always work, but that’s the idea.”
Employer Considerations
Fenton points out that it is easy to say the law will be repealed, but when the industry is already entrenched in the ACA—and it is a complicated law, affecting employers, insurance companies, state and federal health insurance exchanges—it is unclear how to, practically, unwind it in an orderly fashion. He can see chipping away at pieces here and there, but, after six and one-half years of implementation—with entire departments at insurance companies and employers dedicated to it—years will be needed to reverse it. “No one fully understands the fallout of Trump’s plan,” he says.
“There are clear employer relations problems that would [arise] if benefits currently offered are cut back,” Friedman says. However, for the last 15 years or more, employers have had to constantly battle with higher health care costs while finding some way to still offer good benefits but not be drowned by the high cost of escalating premiums, he says. “For a long time, there have been higher deductibles, co-pays and cost-sharing. Employees are used to annual changes in employer offerings.”
Manville says that the decision about whether to cut back benefits is a high hurdle to overcome—possibly leaving those with health benefits the ACA had provided in the lurch.
Employers need to be engaged in the debate going forward, because they pay for most of the coverage of individuals, therefore they need to drive the efforts for change, he adds. “They need to step it up now and talk about all the time, money and effort employers spend on health care.”