For employers, health care reform is more of a business issue than a policy issue. But since the mid-term elections last month, it's clear that the Patient Protection and Affordable Care Act (PPACA) is still so politically charged that employers will likely see changes to it in the future.  

Business as usual -- or politics as usual -- for PPACA?

For employers, health care reform is more of a business issue than a policy issue. But since the mid-term elections last month, it's clear that the Patient Protection and Affordable Care Act (PPACA) is still so politically charged that employers will likely see changes to it in the future. 

The outcome of the elections -- a Republican majority in the House and significantly more Republican-controlled states -- has intensified the long-standing political debate over how to overhaul our nation's health care system. 

"Clearly, health care reform played a role in these elections," said Jim O'Connell, Ceridian's consultant on legislative and regulatory affairs in Washington, D.C. "We can expect proposals to amend the new law, as well as oversight hearings to spotlight the most controversial aspects, including scheduled tax increases and mandates."

But what this will mean in the next couple of years for employers, who are preparing for health care reform provisions that take effect in the 2011 plan year, is open to speculation. 

"The consensus at this point is that major amendments are unlikely to become law because Democrats, who still control the U.S. Senate, won't agree to the kinds of fundamental changes Republicans want," O'Connell said. "The president and the Democratic leadership won't agree to substantive changes because that would be tantamount to admitting they made big mistakes in enacting PPACA in the first place. Many Democrats continue to see the health care reform law as a landmark legislative achievement -- right up there with Medicare and Social Security. But heated debate and delay -- coupled with demands for increased regulatory flexibility -- are likely scenarios for the new Congress." 

O'Connell recently participated in meetings held by the National Business Group on Health and the American Benefits Council, as well as other groups, to assess the implications of the 2010 elections for PPACA. 

PPACA's Impact on the Elections 
First, it is clear that Democrats' association with PPACA contributed significantly to their historic losses on Election Day, O'Connell said. For many voters, especially independents, PPACA symbolized big government and more entitlement spending. Republicans gained more than 60 seats and control of the U.S. House of Representatives -- the biggest swing since 1948. In addition, the 2010 elections swept Republicans not only into federal offices but also into state legislatures and governors' mansions throughout the country. Democrats now will control the fewest state legislative chambers since 1928. 

"These numbers are telling," O'Connell said. "Almost 20 percent of voters said health care was the most important factor in their vote -- a gigantic relative factor. Moreover, 1 of every 2 voters wants the law repealed. Of 51 incumbent Democrats who lost, 34 voted yes on PPACA; 17 others voted no, but lost anyway." 

What issues loomed the largest in the elections? "The economy and jobs," O'Connell said. "President Obama early on tied health care reform to the economy -- perhaps sinking Democrats on Election Day." 

The Election's Impact on PPACA 
O'Connell said that as a result of the elections, there are some legislative scenarios that could bring changes to the law: 

  • Repeal & Replace 
    Many in our nation's capital, including Republican Congressional leaders, advocate repealing and replacing PPACA. "While the House of Representatives could approve such a bill, the Democrat-controlled Senate would block it and President Obama would veto it if such legislation got through Congress," O'Connell said.
  • De-Funding 
    This scenario involves shutting off appropriations to those agencies that carry out controversial parts of PPACA, such as the Department of Health and Human Services and the IRS. "But there are at least two problems with this," O'Connell said. "One, the link between agency funding and specific provisions of the law is not that clear; and two, it risks a government shutdown and a shift in advantage from Republicans to Democrats."
  • Regulatory Oversight 
    The Republican House could exert pressure for more flexible PPACA regulations, such as more lenient grandfather rules, longer-term waivers for employer plans and tighter interpretations of the age-26 mandate. "Greater regulatory flexibility would be useful, but House Republicans don't want to be perceived as investing too much time on health care reform when jobs remains the biggest issue facing the country," he said.
  • Legislative Corrections 
    Republicans might have success "chipping away" at specific PPACA provisions on a bipartisan basis. "Clearly, there is consensus to repeal some provisions," O'Connell said, "such as the expansion of Form 1099 reporting." (See Compass Points) Democrats might welcome the opportunity to vote to "improve" health care reform with some minor "tweaks," as President Obama put it, but Republicans are unlikely to settle for this strategy. Also, expect up and down votes on the individual coverage mandate and employer "Play or Pay" in 2011 - with probably neither being repealed, O'Connell said.
  • Delay 
    Perhaps Republicans' most fruitful angle for reshaping health care, O'Connell said, would be a strategy of delaying effective dates of the most controversial provisions in PPACA. "Expect amendments to be considered in the House that would push back some effective dates to 2016 and beyond," he said. Political benefits of this approach include keeping these controversial issues in front of the voters while arguing for more time for states and employers to implement the changes. "Democrats would be hard-pressed to oppose giving states and businesses more time, especially in the challenging economic climate."
  • Leverage States' Influence 
    "Republican governors and state legislatures have several levers to influence health care reform," O'Connell said. They could join in lawsuits challenging the constitutionality of the individual mandate. They could resist the huge expansion of Medicaid embedded in PPACA. They also could customize the new health insurance exchanges - a keystone of health care reform - slated for 2014. In many ways, the state exchanges will be where "real-world" health care reform actually gets implemented, he said. 

    "In creating their exchanges, states could adopt market-based networks with minimum requirements for plan eligibility, thereby re-casting the PPACA concept of insurance exchanges," O'Connell said. We could see many state variations on the theme of health insurance exchanges, depending on how much flexibility HHS allows, he said. 

    Another possible scenario is that governors, feeling the pressure of soaring state budget deficits and under-funded public employee retiree health benefits and pensions, could make a strong case to delay Medicaid expansion and perhaps other mandates. 

    Yet even if Congress remains split on whether or how to change the health care reform law, most parts of the new law will not change, O'Connell said - especially those affecting employer plans such as the bans on lifetime coverage limits and pre-existing condition exclusions for children. Employers should continue moving toward compliance with those PPACA provisions taking effect in the coming year, as they look ahead to the next two years. 

    "All eyes are now turning to the 2012 presidential and congressional elections," O'Connell said. "Health care reform is likely to be just as hot then as it proved to be in 2010."