Update: On March 24, the Speaker of the House of Representatives withdrew the ACA repeal-and-replace bill and stated that the ACA will be left intact for the time being. Please click here for the latest update.
Many business people I know are trying to figure out what’s going to happen to Obamacare and how it’s going to impact their future costs. Healthcare is a huge line item on your profit and loss statement so this is not a small issue. There’s a lot of debate in Washington as I write this. But here are things I know for certain will happen shortly after Donald Trump’s inauguration – and what actions you should take.
1. Things Won't Change Overnight
There are lots of discussions about “repeal and replace.” Some want legislation that will immediately repeal the Affordable Care Act (ACA) without a replacement in effect. Others want to wait until a more detailed plan is approved. What will happen is that the ACA will be repealed right away – either by votes or through lack of funding. Both Trump and the Republicans promised this and they’ll make good on the promise. They’ll repeal without a replacement plan to appease the wing of the party that insists on this. But the repeal will be “phased-in” to give Congress enough time to come up with a suitable plan that, unlike the 2010 legislation, has bi-partisan support so that it can survive over the long term. Expect to see its changes take effect over the next two to four years, which means you’ve got time to think, get educated, and prepare.
Your actions: Watch these developments closely and plan on attending one or two seminars on healthcare legislation this year and next.
2. Key Parts of Obamacare Will Survive
There are some parts of Obamacare that will stick around. The provision allowing those with pre-existing conditions to keep their insurance, even if they switch jobs, will survive. So will the ability of parents to allow their dependent children to stay on their plans through the age of 26. The Obamacare exchanges will likely survive in at least a form to allow individuals to purchase their own insurance. This is good news for the many that support these parts of the law. But they’re expensive which means that other parts of the legislation, such as the 3.8% tax on investment income, the additional Medicare tax for wealthy individuals and the planned levy on expensive “Cadillac” health plans are likely to survive too.
Your actions: Be confident that employees with pre-existing conditions or dependent children under the age of 26 will likely continue to be protected, but don’t expect certain taxes to go away anytime soon.
3. Key Parts of Obamacare Will Change
The individual and corporate mandates, which required people and companies to get insurance are going to be repealed. Funding for certain programs, such as Planned Parenthood, will dry up. The requirement for insurance companies to provide coverage for some controversial procedures, such as abortions, will also dry up. Religious groups will have more freedoms. The list of coverages that insurance companies must provide will mostly go away, leaving these decisions up to the insurance companies. The standard Gold, Silver, and Bronze plans will be replaced by many new options depending on price and need.
Your actions: With the mandates disappearing, you may want to revisit changes to your coverages and your health plan offerings. You may want to decide to drop healthcare altogether or significantly scale it back if you’re finding too expensive. There’s good news – legislation passed in December will now allow companies to offer Healthcare Reimbursement Accounts which can help subsidize the cost of health insurance purchased by those employees who choose to get it outside of your company. You’ll want to meet with your benefits advisor to discuss these options.
4. New Ideas Will Be Tried
The Republicans want healthcare to be more market driven, and less government-controlled. To this end, we’ll see programs that will allow insurance companies to sell their products across state lines and creation of other, new programs to meet market demands. Individual Health Savings Accounts are likely to be allowed to help defray costs. Some proposals also recommend letting people deduct the cost of their healthcare premiums on their tax returns. Rather than increasing Medicare coverage, states will likely receive block grants from the government to decide what subsidies are best for their local residents.
Your actions: You will want to meet with your benefits advisor and your accountant to discuss the tax ramifications of these changes, along with the impact they may have on your employees. Consider setting up educational forums for your employees so they can learn about these changes and save money on their own. Make your advisors available to help counsel them.
5. Short Term Costs Are Going to Go Up
Regardless of what happens in Washington this year, you can be assured that your 2017 rates are going to stay the same. All of these changes are going to affect what happens after this year, which means that you’ve got at least one year to make your plans. Business insurance rates had double-digit increases, on average, this year and my expectation is that we will see similar, if not higher increases for the next two to three years. That’s because all of these changes, which impact 20% of the U.S. economy, create instability and insurance companies hate that. To maintain profitability, health insurers will be creating their own cushions and reserves to absorb any unknown impacts brought on by the new legislation and passing on these costs to their customers.
Your actions: If, like many employers who wish to remain competitive and attract good employees, you plan on maintaining your health benefits, you should be leaning towards high deductible plans, coupled with a company Health Savings Account. Educate your people on the savings they can achieve personally if legislation is passed. Also, look ahead and consider hybrid or level-funded plans which combine elements of group insurance and self-insurance – your benefits administrator should be able to provide information on this.
There will be many changes ahead in healthcare, which means much uncertainty. You’ll hear many experts argue how great or how terrible these changes will be. But just remember – if there’s one thing we’ve learned about experts it’s that no one really knows what’s going to happen. It’ll be at least a few years before we truly understand who was right and who was wrong.