What Does the Election Mean for Health Care Reform?

During the campaign, President-elect Trump promised to repeal health care reform on his first day in office. Full repeal on inauguration day is almost certainly impossible; however, repeal of substantial provisions is quite possible.

Full repeal of health care reform would require 60 votes in the Senate and Republicans barely have a majority. Budget-related items only require a simple majority and that means that the budget-related parts of health care reform could be repealed shortly after the new Congress convenes in early January. It would therefore be possible for President Trump to sign a bill repealing major portions of health care reform on inauguration day.

What would that look like?  We have a good idea, based on a bill passed by the Senate during the current session of Congress. The House has voted dozens of times to repeal health care reform and for the first time, the Senate voted to repeal what it could, using the budget reconciliation process. President Obama vetoed the bill, but it has already been written and could easily be re-introduced in January as is. That bill would have:

  • Eliminated the expansion of Medicaid
  • Eliminated the subsidies in the Marketplaces
  • Eliminated penalties for individuals without Minimum Essential Coverage
  • Eliminated penalties on employers that fail to offer Minimum Essential Coverage or affordable, Minimum Value Coverage
  • Eliminated the small employer health insurance tax credit
  • Eliminated the new taxes required to fund health care reform, including the so-called Cadillac tax, the Health Insurance Tax and the increased Medicare taxes on higher income taxpayers
  • Allow health savings accounts (HSAs), health flexible spending accounts (FSAs) and health reimbursement arrangements to pay for over-the-counter medications
  • Lower the tax on distributions from HSAs that are not used for medical expenses
  • Remove the limit on salary reductions for health FSAs
  • Allow tax deductions for medical expenses in excess of 7.5 percent of adjusted gross income, instead of 10 percent.

Many of the provisions in this bill would have taken effect in two years, allowing time for all parties to transition to the new rules.

Note that many provisions of health care reform are not affected by this bill, including the most popular provisions like prohibiting pre-existing conditions exclusions and guaranteeing that anyone, regardless of health history, can purchase health insurance during an open enrollment period or a special enrollment period.

The health care reform law is a complex law and some parts of the law are required in order for other parts to work properly. If insurance companies are required to issue policies to sick people, without excluding pre-existing conditions and if there is no money to subsidize the premiums, it is likely that healthy people will decide they cannot afford the coverage. That would leave the pool of insured people with a sicker population, which would drive up premiums, which would lead more people to conclude they could not afford health insurance—a “death spiral”. Such a situation would almost certainly cause most, if not all, insurance companies to decide to exit the individual health insurance marketplace, leaving a single payer plan as the only remaining option.

Such a scenario could be avoided with additional legislation. A draft House Republican proposal would allow anyone buying their own health insurance to qualify for tax credits, regardless of income, although the amount of the tax credit is not specified. As a candidate, Donald Trump proposed to allow everyone to deduct health insurance premiums from their taxable income. These proposals would effectively replace the subsidies and Medicaid expansion, but whether they would be adequate to encourage enough people to purchase health insurance to avoid a death spiral is an open question. Other approaches to avoid a death spiral are possible, including limits on rate increases.

Donald Trump has also talked about expanding the use of HSAs, allowing health insurance to be sold across state lines, medical malpractice reform, and having a subsidized program for people with health problems, which would be needed if insurance companies were no longer required to issue policies to anyone, regardless of health.

About John Garner

John Garner has over thirty five years of experience in employee benefits. He specializes in compliance, health care reform, the Health Insurance Portability and Accountability Act (HIPAA), the Consolidated Omnibus Budget Reconciliation Act (COBRA), and the Employee Retirement Income Security Act (ERISA). He helps clients with life, health, and disability benefits, cost containment, flexible benefits, and claim consulting.

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