Obamacare to Trumpcare: What’s Next?

The health care industry appears to have not seriously considered the possibility that Donald Trump would be elected President. While Mr. Trump campaigned on “repeal and replace” the Affordable Care Act (aka “Obamacare”), it is anything but clear what comes next. This edition of the Health Law Bulletin will at least attempt to highlight the key issues and what the future may hold.

What is Obamacare?

Let’s start with what Obamacare provides: No exclusion for pre-existing conditions (“guaranteed issue”), children can stay on their parents’ plan until age 26, persons who can afford health care must purchase it or be penalized (the “individual mandate”), no annual or lifetime caps, mandated minimum essential health benefits, expansion of Medicaid coverage with the federal government picking up most of the tab, and establishment of exchanges with subsidies for individuals and families at 100- 400% of the federal poverty level. Approximately 21 Million Americans have health coverage as a result of Obamacare.

The ACA also added many program protections and enforcement tools to reduce fraud and abuse. Further, the ACA established the Center for Medicare and Medicaid Innovation which has been responsible for initiatives such as advanced ACO and bundled payment models.

What Vote is Needed to Repeal the ACA?

Under long-standing Senate rules, Democrats could filibuster any attempt to repeal the ACA. Because the Republicans hold a slim majority in the Senate, it is unlikely they would be able to get 60 votes for cloture and break the filibuster. Nevertheless, through a process known as reconciliation, a majority of the Senate (and House) could pass legislation to effectively defund key provisions of the ACA such as the subsidies for the exchanges, the penalty for not obtaining coverage if you can afford it, and funding for the Medicaid expansion.

What ACA Provisions May be Retained?

Recently, Mr. Trump indicated that he liked certain provisions of the ACA such as guaranteed issue and allowing children to stay on their parents’ coverage until age 26. He and House Republicans have also indicated that they do not intend to completely eliminate the coverage that 21 Million Americans currently have under the ACA. It also seems unlikely that the ACA’s anti-fraud and abuse provisions – which enjoy bipartisan support – will be repealed. Similarly, the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”) (the so-called “doc fix”) had bipartisan support and will likely continue to be implemented.

What are the Key Features of “Trumpcare”?

To date, the main “replace” features outlined by President-elect Trump on his website include permitting the sale of insurance policies across state lines, full deductibility of premiums paid by individuals, expanded use of Health Savings Accounts (“HSAs”), establishment of high risk pools, and Medicaid block grants to the states.

One of the key hurdles facing the new President and the Republican controlled House and Senate is how to enable the 21 Million newly insured to retain quality health care coverage and retain the protection for people with pre-existing conditions. The original thinking was that the individual mandate would incentivize (to avoid a penalty) younger, healthier citizens to buy insurance. This would help to spread the risk from the many sicker people who would now be eligible for coverage. However, perhaps because the potential penalty for not obtaining coverage was a fraction of the cost of obtaining health insurance, not enough healthy people have purchased coverage. As a result of adverse selection by a sicker population, insurance companies in many markets have had to raise premiums significantly, or even pull out of the state exchanges entirely. In turn, this makes it even more likely that healthy people will choose to pay the penalty rather than purchase increasingly expensive coverage, the so-called “death spiral.”

Opponents of the ACA vehemently opposed the individual mandate which the U.S. Supreme Court ultimately upheld in 2012. So it is difficult to see how the new President and/or Senate and House Republicans will include it in any “replace” legislation. On the other hand, if Mr. Trump supports continued protection for those with preexisting conditions, without the individual mandate and with no penalties for those who can afford health insurance but elect to go without, it is also difficult to see how the current adverse selection problem will be resolved. One suggestion to get more insurance companies to offer plans through the exchanges is to provide greater subsidies through the risk corridor program which is set to expire at the end of the year.

What is the Timing for Repeal and Replace?

Given the complexity of the ACA, its massive implementing regulations, and the difficulty in crafting a legislative solution to retain coverage for a substantial portion of the 21 Million people currently covered under the ACA, observers predict it could be at least two years before major “replace” changes will be implemented.

What Would be the Impact of Repeal in California?

California has gone “all in” on the ACA. Covered California is the largest and, arguably, most successful of the state-run exchanges. 1.4 Million Californian’s have insurance through the exchange, with 90% receiving subsidies. The Medicaid expansion has added 3.8 Million new enrollees. Federal payments for the Medicaid expansion total $15 Billion. The loss of the Medicaid expansion money could obviously be devastating to California’s budget.

What’s Next?

Candidly, no one can predict with any certainty what is to come. At least symbolic repeal legislation could be passed early next year; but it might include a lengthy waiting period while the “replace” legislation is crafted. Key industry players, including hospitals, organized medicine, insurers and big Pharma will undoubtedly lobby heavily to protect their interests. Presumably all stakeholders can agree on one thing: we are on uncharted waters.

We will, of course, continue to closely follow developments on this critical national issue and provide regular updates.

In the interim, please feel free to contact your regular Miller Health Law Group attorney for further information.

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