January 26, 2017

The ACA Executive Order – What Employers Should Expect to Happen on ACA Compliance

January 20, sometime between the end of the Inaugural Parade and the start of the Inaugural Balls, President Trump went into the White House Oval Office and signed his first executive order — “Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal”. Here is the full passage (section 2) from the order:

To the maximum extent permitted by law, the Secretary of Health & Human Services (HHS) and the heads of all other executive departments and agencies with authorities and responsibilities under the Act shall exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the Act that would impose a fiscal burden on any State or a cost, fee, tax, penalty or regulatory burden on individuals, families, health care providers, health insurers, patients, recipients of health care services, purchasers of health insurance, or makers of medical devices, products or medications.

What does the executive order mean?

First, at the time the president signed the order no explanatory statement was made available by the White House. Employers and others can only speculate as to next steps.

Second, nothing is expected immediately. The president’s nominee for HHS secretary, Georgia representative Tom Price, M.D., has yet to be confirmed by the U.S. Senate. There are also no agency heads as yet, including at IRS, principal enforcer of ACA penalties.

Nevertheless, what ACA provisions or requirements might reasonably be eligible for waiver, deferral, exemption or delay because of their “fiscal burden” or “cost, fee, tax, penalty or regulatory burden”?

One place to look for guidance in answering this question might be the Obama Administration’s own executive actions and interpretations.

For example, the ACA Individual Mandate to enroll in minimum essential coverage or face a tax penalty, upheld by the Supreme Court in 2012. Not only did HHS on several occasions extend ACA exchange open enrollment windows with so-called “special enrollment periods,” but HHS created numerous exemptions from the mandate itself, including providing “hardship exemptions” for some who had not enrolled in mandatory coverage.

In addition, the employer mandate to offer full-time employees affordable and minimum value coverage or pay stiff penalties, euphemistically “employer play or pay,” was the subject of several Obama Administration delays, with HHS and IRS invoking provisions of the law they said gave them broad interpretative discretion.

The “Employer Shared Responsibility” mandate itself was delayed for one year from 2014 to 2015 for applicable large employers (ALEs) with 100 or more full-time employees and for two years to 2016 for ALEs with between 50 and 99 full-time employees. Also, the coverage scope was reduced to 70 percent of full-time employees for 2015, rising to 95 percent for 2016.

IRS also delayed the ACA compliance requirement for annual employee health coverage information reporting, i.e., to file Forms 1094 and 1095 with IRS and to furnish corresponding statements to employees. The law originally required employers to file such information returns in early 2015, but this was delayed until early 2016. And, of course, in December 2015 the due date for Forms 1094-C and 1095-C to be filed with IRS was delayed again, this time until May 31, 2016.

Based on these Obama Administration precedents, President Trump’s first executive order likely means waivers, exemptions or delays in these requirements, especially those that impose a cost, fee, tax, penalty or regulatory burden—such as the Individual Mandate and the Employer Mandate.

What should employers do now?

Keep your eye on the compliance ball in the here and now. For the moment, and for the short term, nothing has changed. ALEs must still offer affordable and minimum value coverage to employees who work an average of 30 or more hours a week determined by look-back periods and continuing for specific stability periods. And employers must still prepare to file information returns with IRS and furnish statements to employees.

What should employers expect to happen on ACA compliance?

There seems little doubt that President Trump’s executive order, together with the January votes in the House and Senate on a budget resolution that contemplates repeal and replacement, sometime in 2017, represent the first steps in an effort to dismantle the Affordable Care Act. The executive order directs agencies with ACA regulatory authority to interpret their authority aggressively to chip away at the regulatory requirements of the 2010 law.

To be sure, President Trump and the executive branch of government can take only limited administrative and interpretative action to change the healthcare reform law. Only Congress can reorganize and reorient the law itself, and is expected to do so over the course of 2017 and maybe even into 2018, ideally with support from some congressional Democrats.

At the same time advocates of change cannot pull the rug out from under 20 million or so Americans that have health insurance coverage as a result of the law, through Medicaid expansion, qualifying for parents’ health plans to age-26 or enrolling in federal or state exchanges with the help of government subsidies. Republicans, Democrats and the White House must find a way to protect insurance coverage for ACA beneficiaries with some legislative bridge to transition them to the eventual replacement system.

But President Trump’s Inauguration Day executive order signals that Affordable Care Act change is an urgent priority. It means that IRS and HHS could soon announce waivers, exemptions or delays in enforcement of the Individual Mandate and the Employer Mandate, including in employer reporting.

The January 20 executive order may represent a fundamental policy shift from imposing government mandates to easing the burdens of government regulation. If so, employers can expect a significant rollback in the regulatory burden of ACA compliance. So it begins….

Jim O'Connell

With more than 30 years of experience in federal legislative and regulatory affairs, Jim O’Connell focuses on HR and PAYROLL POLICY ISSUES, keeping customers informed about fast-changing and complex compliance regulations and workforce trends. Follow him on Twitter JOCWashDC

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