Republicans Pull Healthcare Bill: New Compliance Uncertainty for Employers

"Obamacare is the law of the land for the foreseeable future."
House Speaker Paul Ryan (R-WI)

What happened?

On Friday March 24, the House of Representatives abruptly halted consideration of the American Health Care Act (AHCA), legislation crafted by the Republican leadership and endorsed by President Trump, to repeal and replace the 2010 Affordable Care Act (ACA).

With a 237-193 seat majority in House, Republicans needed 216 “yes” votes to approve the bill and send it to the U.S. Senate. With no Democrats expected to vote for a bill that would eviscerate President Obama’s signature legislative achievement, Republicans could afford to lose no more than 21 votes. But minutes before the scheduled 3:30 PM vote the White House and Republican leaders conceded they would lose some 40 Republican members and therefore would have no more than 200 votes.

Ironically, conservative and moderate House Republicans appeared set to join all Democrats in voting against the leadership’s bill. Conservatives because the bill they called “Obamacare Lite” didn’t fully repeal the ACA and moderates because the proposal would cause many Americans to lose insurance. As a final vote approached the Republican consensus for the bill simply melted away.

Rather than expose their members to a dead-end vote on such a controversial measure, Speaker Ryan pulled the plug, likely ending consideration of the bill for 2017.

Why did this happen?

The key to deciphering the failure of the bill can be found in the ACA’s 7th anniversary that occurred the day before. After seven years, the ACA is “working” for upwards of 20 million people, half who benefit from the law’s expansion of Medicaid eligibility and almost half who qualify for government subsidies to help pay premiums for ACA coverage.

The Congressional Budget Office (CBO) highlighted these benefits when it reported on March 13 that if the proposed bill became law some 24 million more people would be uninsured by 2026. Citing provisions that would roll back the Medicaid expansion, end the Individual Mandate and cut income-based government subsidies, CBO concluded that even next year the number of uninsured would climb by 14 million. Aghast at these numbers many Republicans peeled off the bill.

This legislative debacle may have reminded everyone of an important civics lesson: once embedded in our nation’s social fabric, health coverage cannot be perceived to be revoked for 20 million Americans. At the end of the day this may be the real reason for the fate of the American Health Care Act.

What happens next?

Republican lawmakers are not likely to want to reconsider healthcare reform legislation any time soon. First, it will take some time for intra-party wounds to heal. Second, there was no Plan B. And third, there are other legislative priorities, including tax reform.

One might think that tabling AHCA would mean continuing with ACA business as usual. The problem is, ACA faces its own challenges.

Just as it proved an immovable obstacle that 20 million people can’t be kicked off health coverage, an irresistible force is that ACA premiums rose by an average 25 percent in 2017. Earlier this month HHS announced a first-ever decline in exchange sign-ups. And, Insurers warn of a “death spiral” as premiums soar and mainly sicker people enroll. With many U.S. counties having only one insurer the 7-year old ACA architecture may not be sustainable.

Indeed, in announcing the failure of AHCA President Trump declared, “2017 is going to be a very bad year for Obamacare. We’ll end up with a truly great health care bill in the future after the mess known as Obamacare explodes.”

In short, AHCA may be off the agenda for now but 20 million people may be depending on an unstable ACA. All this presents a question to President Trump: if ACA premiums continue to escalate, insurers exit and enrollment numbers fall, will the Administration act to rescue a law the President opposes? How the White House—and Congress—answer this question could be the critical next step.

What does all this mean for employer compliance?

In a word, uncertainty. The proposed American Health Care Act effectively would have repealed the ACA Employer Mandate to offer affordable and minimum value health coverage to full-time employees by “zeroing out” IRS penalties. AHCA also would have rolled back requirements that employers annually file with IRS and furnish employees Forms 1094 and 1095 health coverage information reports. And the 40 percent “Cadillac Tax” on employer-sponsored high-value health plans would have been pushed back ten years.

With attention reverting back to the Affordable Care Act employers will now focus on President Trump’s Inauguration Day Executive Order directing HHS, IRS and other agencies to “waive, defer, grant exemptions from or delay any ACA requirement” that would “impose a fiscal burden on any State” or “cost, fee, tax, penalty or regulatory burden” on individuals, insurers, health care providers or others.

How might agency leaders respond now that the American Health Care Act is off the calendar? Will HHS Secretary Dr. Tom Price or Treasury Secretary Steven Mnuchin announce a new enforcement interpretation to ease ACA regulatory burdens? Will there be waivers of deadlines? Exemptions from requirements?

Last week’s decision to pull the plug on AHCA, together with President Trump’s Executive Order, create a new compliance uncertainty for employers. They can only hope that with the defeat of AHCA and the instability of ACA Republicans and Democrats will agree that only a bipartisan solution can put health policy on a sustainable path for all Americans.

To learn more, I invite you to join me on a special webcast: President Trump’s First 100 Days: Staying Ahead of the 2017 Compliance Curve, on Wednesday April 5 at 2 PM ET.