This is the 57th in a series of WorkCite articles concerning the Patient Protection and Affordable Care Act and its companion statute, the Health Care and Education Reconciliation Act of 2010 (referred to collectively as the ACA). This article reviews the current efforts of the new Congress and the Trump administration to modify the ACA or to repeal and replace it with other legislation.
Not long after his inauguration on Jan. 20, President Trump signed his first executive order, paving the way for his administration and Congress to determine the future of the ACA. The order came a week following the House of Representatives’ passage of the Senate budget bill that was the first step of the two-part legislative efforts to repeal the ACA.
While congressional committees draft the details of the repeal legislation, the order creates more uncertainty for sponsors of group health plans as well as for individuals covered under those plans or under policies purchased through the ACA insurance exchanges.
With the House passage of the Senate budget bill, the following four congressional committees have been charged with drafting legislation to repeal the ACA: the Finance Committee and the Health, Education, Labor and Pensions Committee in the Senate and the Ways and Means Committee and the Energy and Commerce Committee in the House. The bill instructs them to complete a draft of the repeal legislation by Jan. 27. It is unclear at this point what aspects of the ACA, if any, may be preserved in the repeal legislation, as various current and former members of Congress have proposed differing options.
The Executive Order
In his executive order, the president states that it is the policy of his administration to seek the prompt repeal of the ACA. Pending the conclusion of the repeal efforts, the stated intent of the order is to efficiently implement the ACA, minimize unwarranted economic and regulatory burdens, and afford states more flexibility to create a freer and more open healthcare market.
The order requires the Secretary of Health and Human Services and the heads of other executive departments and agencies (collectively, Agencies) with authority and responsibilities under the ACA to:
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 [ACA] that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications.
As the Treasury and Labor departments are also Agencies with authority and responsibilities under the ACA, the order is directed to the secretaries of those departments as well. Given the broad nature of the order, it could have a significant impact on employers sponsoring group health plans.
The order raises critical questions, including the following:
- How does the order affect current Agency guidance concerning the ACA?
The Agencies are charged with overseeing and implementing laws passed by Congress. The Agencies issue guidance in many forms, including formal regulatory guidance (i.e., regulations) that must be promulgated through specific procedures set forth in the Administrative Procedure Act. This formal rulemaking procedure can be lengthy and generally requires an Agency to give public notice and a period during which the public can comment before regulations are finalized.
The regulations the Agencies have developed over the past six years provide the framework for the implementation and enforcement of the ACA. Although the order purports to grant broad discretion to heads of the Agencies to take steps to waive certain compliance obligations, it is uncertain whether the order can change Agency enforcement practices without their adherence to the formal rulemaking procedures or without action by Congress to amend or repeal the ACA or to override regulations.
- The ACA’s “individual mandate” obligates individuals to maintain “minimum essential [health] coverage” (MEC) or pay penalties. If this mandate is suspended, how will employers be affected?
The individual mandate could certainly be seen as a “fiscal burden” (in the words of the executive order) on individuals. One of the president’s advisers was asked in a television interview on Jan. 22 whether the president would stop enforcement of the individual mandate and she replied, “He may.”
The ACA’s “employer mandate” — the obligation of “large” employers to offer MEC to full-time employees — can be seen as an effort to enable employees and their dependents to comply with the individual mandate. Therefore, the need for the employer mandate becomes questionable if there is no tax on individuals who do not maintain MEC. Also of questionable value, if the individual mandate is not being enforced, is the obligation of large employers and insurance companies under the ACA to report to the Internal Revenue Service (IRS) whether individuals have MEC.
Answers to these questions must await word from the Agencies, once they have determined how they will implement the order.
Until we hear from the Agencies in response to the executive order, or until Congress takes action to repeal part or all of the ACA, the status quo likely will continue for all aspects of the ACA on which the Agencies have already provided formal guidance. This means, for now, continued compliance with the following aspects of the ACA, among others:
- the individual mandate, the employer mandate and the taxes triggered by noncompliance;
- the reporting obligations and IRS enforcement of taxes due from large employers who fail to timely and accurately report the coverage offered to employees and their dependents;
- the market reform requirements (such as coverage for dependents up to age 26, no pre-existing condition exclusions, and prohibition of annual and lifetime limits) and IRS enforcement of taxes due from large employers whose self-insured group health plans fail to satisfy market reform rules; and
- the anti-discrimination rules related to, among other things, transgender benefit protections,* and the enforcement of these provisions.
The executive order could further delay guidance on, and halt enforcement of, various ACA requirements, including the following:
- the excise tax that is expected to be imposed beginning in 2020 on high-cost employer-sponsored group health plans (i.e., the “Cadillac” tax);
- the excise taxes and penalties to be imposed on insured health plans that discriminate in favor of highly compensated individuals;
- finalization of proposed rules regarding information-reporting of catastrophic health coverage and related issues;
- finalization of proposed rules regarding premium tax credits to individuals needing assistance to purchase healthcare insurance on the exchanges; and
- finalization of proposed rules related to expatriate health plans.
For further information, please contact one of the authors of this article — Felicia M. Gardner, Carolyn M. Trenda, Sally Doubet King and Larry R. Goldstein — or any other member of the McGuireWoods employee benefits team.
*Note, however, that the ACA regulations prohibiting discrimination in health plans on the basis of gender identity that were effective for plan years on and after January 1, 2017 are the subject of litigation. At the end of last year, in a case before the U.S. District Court for the Northern District of Texas, the court issued a preliminary injunction prohibiting the Department of Health and Human Services from enforcing those regulations on a nationwide basis.