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Reconciliation: How It Works & What to Expect

The new Congress and Administration is poised to repeal and replace the Affordable Care Act, but there are just as many questions as there are answers emerging on what a new policy will look like and how Congress will muscle through repeal and replace legislation. The first item to understand is the Senate’s reconciliation process and its limits. Reconciliation is a legislative maneuver in the Senate that allows legislation to pass by a simple majority- 51- votes, as opposed to the usual 60 vote threshold to move legislation through the senate. For legislation to qualify for reconciliation, it must have a budgetary impact. The reconciliation maneuver was used to pass the Affordable Care Act, and will now be used to undue it. However, only policies with a budgetary impact will be able to be undone by the maneuver. Republicans have a 52 seat majority, and need eight Democrats to joint their efforts to reach the usual 60 vote threshold. Despite 10 Democrats representing states that voted for Trump, it’s difficult to see any more than two Democrats supporting a repeal of the ACA.

We can quickly devise what items will be included in the repeal bill poised to pass in the next Congress by looking at the last repeal bill that was passed by reconciliation in the last Congress and ultimately vetoed by President Obama. That bill repealed all of the ACA’s taxes—the Cadillac Tax, the medical device tax and the health insurance tax. It also repealed the employer and employee mandates, the federal subsidies, and delayed a repeal of the exchanges by two years. We expect next year’s repeal bill to do the same. Click here to view a complete summary of last year’s repeal bill.

Repeal & Delay

The big question at hand is how Congress and the Trump administration will replace the Affordable Care Act. There is no political will to undue the ACA’s market reforms like the elimination of preexisting condition policies and allowing children up to the age of 26 to remain on the their parents plans. We expect the market reforms to remain intact. The challenge will be keeping these reforms in place while simultaneously eliminating the employer and employee mandates and the federal subsidies. Without a clear replace plan, the millions of Americans currently purchasing coverage through the exchanges could be exposed to major premium increases as the markets could be driven by adverse selection issues. That’s a scenario that Congress wants to avoid. We’re now hearing the term “Repeal and Delay” as a leading strategy.

The current thought is that Repeal and Delay would consist of a two-step process—an initial vote to repeal the pieces of the ACA that are separate from the market reforms and separate from the exchanges. That initial vote could include language to delay the repeal of the exchanges and subsidies by a period of 2-3 years, allowing for those obtaining coverage through the exchanges to continue that route until Congress devises a clear plan to replace those platforms.

Majority Leader Mitch McConnell stated this week that the first vote next year will be to repeal the ACA. How and whether the other components are delayed remain to be determined. There is significant pressure on Republican leadership from the Freedom Caucus to repeal the entire ACA in one fell swoop, knowing that legislative delay tactics could just kick the can to the next Congress which might lack the current political momentum to unwind the exchanges and the subsidies.

Several replace plans have been floated in the previous Congress from the current leadership, and we can glean some information on the specifics being considered by reviewing their proposals. Speaker Ryan released his “Better Way” plan earlier this year outlining his policy priorities. House Budget Chairman and nominee for HHS Secretary Tom Price’s proposed Repeal and Replace plan can be viewed here. And the proposed Patient CARE Act authored by Rep. Fred Upton (R-MI), Sen. Orrin Hatch (R-Utah) and Sen. Richard Burr (R-NC) can be viewed here.

What’s Ahead

The Council is working hard to advance member interests in this debate. The leading issue for our advocacy efforts next year will be to preserve the tax exclusion for employer-provided plans as we know it. Taxing plans is very much on the table, as you’ll note in the previously proposed plans. Congressional leaders are looking to increase revenue to offset a reduction in the corporate tax rate, and taxing plans supported by champions of consumer-driven health plans and efforts lower overall medical spending. A tax on employer sponsored insurance is a non-starter for us. We are also working to repeal the employer reporting requirements and the Medical Loss Ratio in next year’s initial repeal bill. We’re optimistic that the reporting requirements will go away along with the mandates, and gratified that House Budget Chairman Tom Price, who awaits Senate Confirmation to head the Department of Health and Human Services, is a long-time champion to repeal the Medical Loss Ratio.

President Trump made it clear on the campaign trail that repealing the ACA was a top priority. We’re confident that with a Secretary Price, Speaker Ryan and Leader McConnell, this will be accomplished. We’re now challenged to make the new policies advantageous for our industry and navigate the complicated Repeal and Delay strategy.

CURES Act Provides Small Employer HRA Relief

Today, Congress passed the 21st Century Cures Act, which contains a provision that dramatically alters the way certain small employer health reimbursement arrangements (HRAs) are treated under the Affordable Care Act. Under the provision, employees may use qualifying HRAs to purchase coverage in the individual market. These arrangements will no longer be considered “group health plans” and, with the exception of the Cadillac tax, will not be subject to the ACA’s requirements and/or limitations for group plans (i.e., any of the market reforms). The provision’s effective date is January 1, 2017. The bill received overwhelming bipartisan support, including from President Obama. This bipartisan support reflects the bill’s inclusion of policy priorities for both parties, including work on brain diseases and personalized medicine, as well as funding for opioid addiction.

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Joel Kopperud, VP, Government Affairs:

Cheryl Matochik, SVP, Strategic Resources & Initiatives: