• ACA Replacement Bills Encounter Beltway Traffic
  • April 5, 2017 | Authors: Timothy P. Brechtel; Ricardo X. Carlo
  • Law Firm: Jones Walker LLP - New Orleans Office
  • Since its enactment in 2010, Republicans in Congress have made numerous attempts to repeal the Affordable Care Act ("ACA"), with little success beyond modest tweaks that garnered bipartisan support (such as delaying the "Cadillac Tax"). With Republicans in control of both houses of Congress and the White House, comprehensive changes are a given, though the substance and timing of the changes remain open questions.

    Executive Order

    Hours after taking office, President Trump signed an executive order ("Order") declaring the prompt repeal of the ACA to be the policy of his Administration and directing agencies and department heads to exercise all available authority to waive, defer, or delay implementation of ACA provisions that would impose a fiscal burden on States or would impose taxes, penalties and regulatory burdens on individuals and others (likely including employers, though not specifically mentioned), to the fullest extent permitted by law. While the Order's impact on enforcement of the ACA is unclear, it sends a clear message regarding President Trump's agenda with respect to the ACA.

    Congressional Initiatives

    Congress has already taken steps toward repealing key aspects of the ACA through the budgetary reconciliation process, which is not subject to filibuster in the Senate. Congressional Republicans have also proposed at least seven replacement plans, which hint at what the ACA's ultimate replacement may look like. While the plans differ in many respects, many share the following key elements:
    • Replace premium subsidies with universally available tax credits
    • Expand the role of health savings accounts ("HSAs")
    • Allow the sale of health insurance across state lines
    • Eliminate the individual and employer mandates
    • Phase-out or completely eliminate Medicaid expansion
    • Repeal ACA related taxes and penalties
    • Preserve popular features of the ACA, including:
      • prohibition on preexisting conditions (likely through a creditable coverage concept similar to that applicable to group health plans prior to the ACA)
      • no lifetime limits on coverage, and
      • coverage of dependent children until age 26
    Although Republicans have not reached consensus on how to proceed, particularly with respect to funding the cost of an ACA replacement, many believe that a cap on the employee exclusion for high-cost employer-provided health insurance will be key to funding the new law.

    Timing and Interim Tweaks

    Republicans in Congress aim to have a replacement bill ready by the end of the first quarter of 2017, but in a Fox News interview on February 5th during the Superbowl pregame show, President Trump conceded that replacing the ACA is "very complicated" and that it may not be complete until 2018. In the meantime, changes have already been made to some provisions of the law.

    As noted above, the "Cadillac Tax" on high-cost health plans was delayed until 2020. On December 13, 2016, President Obama signed into law the "21st Century Cures Act," which, among other things, allows small employers (those with fewer than 50 employees) to offer qualified small employer health reimbursement arrangements (or "QSEHRAs") without being subject to catastrophic tax penalties for failure to satisfy ACA requirements for group health plans (such penalties can reach $36,500 per year per covered employee). This is welcome relief for small employers struggling to find an affordable way to help their employees obtain health coverage without running afoul of the ACA's market reform restrictions. For more information regarding the ACA's general prohibition on employer reimbursement of employees for the cost of individual insurance premiums, see our previous Client Alert here. This prohibition remains in effect for those employers who do not meet QSEHRA requirements.

    Replacing the ACA will take time and there will likely be a transition period. The Executive Order does not repeal the ACA, which remains the law of the land. Therefore, employers, individuals and other entities impacted by the ACA should continue to comply with all aspects of the ACA until guidance is issued stating otherwise.