House Republicans Pull ACA Repeal and Replace Legislation before Vote

Late last Friday, Republican leaders in the U.S. House of Representatives withdrew the American Health Care Act (AHCA) from consideration. Pulling the AHCA prior to a vote either effectively ends or indefinitely delays Republican efforts to repeal and replace the Affordable Care Act (ACA). The ACA remains the law, but with a questionable future in terms of enforcement.

On March 6, the House released two bills intended to repeal and replace the ACA through the Budget Reconciliation process (together, the AHCA). The AHCA phased out subsidies to purchase health coverage on the individual market at a certain income threshold, the ACA’s Medicaid expansion, and almost all ACA taxes with the exception of the “Cadillac Tax”, which was delayed. Most importantly for employers, it also zeroed out penalties under the ACA’s employer Pay or Play mandate and penalties for individual taxpayers that do not maintain health coverage. Political problems existed at the outset for the AHCA but escalated when Congressional Budget Office (CBO) estimates showed that by 2026 the bill would increase the number of uninsured by 24 million and individual market premiums would increase by 15-20% in the short term. A number of changes were made to the bill in an effort to garner additional Republican support, but House Republicans ultimately did not have the votes to pass the bill.  Conservative Republicans criticized the bill for not doing enough to repeal certain provisions of the ACA while more moderate Republicans believed it didn’t do enough to provide assistance for vulnerable populations.

What Now
In response to the legislative failure of the AHCA, Speaker of the House Paul Ryan—the leader of the House repeal and replace efforts—said “Obamacare is the law of the land”. President Trump indicated he would either “let the ACA explode” or continue repeal and replace efforts, noting that he never said he would repeal the ACA in the first 64 days of his presidency.
Future repeal and replace efforts are unlikely to succeed. The complexity of the healthcare market limits reform options. The alternatives Republicans developed over the last 8 years were largely included in the AHCA, but the party was unable to build a consensus around those ideas, with objections from the party’s most conservative members to more moderate Republicans.

Employer Considerations
To “let the ACA explode” could mean a regulatory non-enforcement policy signaled in the
President’s January 20 Executive Order (EO) on the ACA. Notably, however, that EO did not direct agencies to ease employer burdens under the ACA. This means that conservative employers and employers that did not have to significantly change eligibility or plan design to comply with the ACA and Pay or Play should continue with strict compliance. Employers that did significantly change eligibility or plan design to meet ACA mandates may want to weigh the diminished risk of enforcement under the Trump administration against their increased costs. For example, if employers reduced employee cost sharing so that their plans would be more “affordable,” they may consider increasing costs because the IRS is
unlikely to prioritize the difficult task of determining whether unaffordability penalties apply on an individual by individual basis. However, enforcement of penalties for failure to offer coverage to 95% of full-time employees would be relatively straight forward and is likely to result in greater revenue generation, making it a more likely enforcement target.  We will continue to monitor developments and keep you updated.

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