The fate of the Affordable Care Act’s employer mandate is looking bleaker with each day of President Trump’s new administration – but experts say that without a mandate, most employers are unlikely to begin offering the skimpiest of plans in response.
The question of a mandate repeal no longer one of “if,” but rather “when,” according to many industry experts.
Last week, Sen. Rand Paul introduced the Obamacare Replacement Act. This bill does away with the ACA’s employer mandate, essential health benefits requirements, community ratings underwriting restrictions and medical loss ratio rules that affect, in part, brokers’ group plan commissions.
Paul has emerged as the lead Congressional driver of a replacement bill to accompany the Republican caucus’ repeal efforts.
No matter the fate of Paul’s bill – in order to avoid or survive filibuster, any replacement option must garner at least some support from Senate Democrats -- the employer mandate could disappear by the end of April, the date by which Congress must pass the remaining 2017 budget.
“We expect both the employer and individual mandates to be addressed in the budget process before a replacement bill is passed,” says Joel Wood, vice president of government affairs for the Council of Insurance Agents and Brokers.
Some may wonder if companies will begin offering so-called “skinny” plans, or simply stop offering group policies altogether, in response to a reversal of the mandate (which requires sponsors to offer a minimum of 60 percent coverage of the cost of most physician and hospital services).
If the mandate is repealed, there is also the question of whether employers will opt as soon as possible to redesign their plans.
“Assuming the employer mandate disappears – and that is looking like a good assumption -- I don’t see why employers couldn’t have the option of offering less generous benefits by the end of this year,” says Paul Fronstin, director of health research at the Employee Benefit Research Institute.
But will they take that option? Both Wood and Fronstin say it’s hard to come by precise data on how many employers currently offer the skinniest plans allowable under the ACA. Neither, however, think that number is significant.
Some employers – typically those in the service and hospitality industries – already offer the leanest coverage they can while still complying with the mandate, says Wood.
But the ACA did not prompt a wholesale switch to bare-bones plans -- just as it also did not trigger a mass employer exodus from the group market.
“It’s important to remember that the term ‘minimum essential coverage’ didn’t exist before the ACA,” says Fronstin. “Employers could offer whatever they wanted, and they were offering high-value services in plans long before the mandate came along.”
Given the role that benefits play in attracting and retaining workforce talent, low unemployment rates could also make it difficult for employers to choose leaner coverage.
While a tighter labor market emphasizes the value of benefit offerings, rising premiums will continue to challenge employers, encouraging more to offer high-deductible plans after repeal. Employers, however, are still highly unlikely to switch to the skimpiest plans, says Wood.
“The absence of a mandate may actually result in far fewer skinny plans,” says Wood. “As far as more robust health benefit offerings are concerned, we think the core driver of employer-sponsored insurance will remain: the need for good employers to recruit and retain good employees.”
Paul’s plan relies heavily on health savings accounts.
For one, it removes the cap on HSA funding and allows for unlimited individual contributions, which would also receive a tax credit of up to $5,000.
It also allows individuals enrolled in a qualified high-deductible plan to open an HSA – something currently not permitted – and allows participants to use account assets to pay their premiums. Qualified services are expanded to include such preventive services as health coaching and weight loss programs.
While some industry watchdogs have suggested that Capitol Hill Democrats may be receptive to HSAs’ future role in the market, Paul’s plan is likely to receive a frosty reception from the party’s populist wing.
“Among stakeholders, there are not a lot of groups opposed to expanding the role of HSAs that I’m aware of,” says Joel Kopperud, who also serves on the government affairs team at the Council of Insurance Agents and Brokers. “But unless Republicans offer options for the working class and lower-wage workers, Democrats are likely to couch Senator Paul’s proposal as another tax cut for the rich and argue that HSAs only work for the financially literate and people who have the extra money to fund their accounts.”
Paul’s proposal is far from Republicans’ only option, however.
Two days before Paul introduced his legislation, Sens. Susan Collins and Bill Cassidy introduced the Patient Freedom Act. It, too, would repeal the employer mandate and removes requirements that “force Americans to pay for coverage they don’t need and can’t afford,” according to one of the bill’s fact sheets.
But it also allows states to choose whether to keep the ACA and its exchanges in place -- an option many expect Republicans to dismiss as “partial repeal.”
Collins admits the proposal’s nascence, but says it’s essential for Republicans to have some sort of replacement plan before repealing the landmark health care bill.
Rep. Tom Price – Trump’s nominee for head of the Department of Health and Human Services – has proposed capping the annual employer tax exclusion for employer-sponsored health benefits at $8,000 for individuals and $20,000 for families. Price’s plan would also require sponsors to offer an equivalent defined contribution deferral, which would allow participants, if they so chose, to purchase plans on the individual market.
Another GOP-backed plan includes limitations on employee contribution tax deductions.
“Most of the guts of the ACA have to do with the individual market, the exchanges and Medicaid,” says Wood. “We’re fine with Congress figuring out how to deal with those markets, but there can be intended and unintended consequences for the 170-million-plus Americans whose health insurance is provided by their employer.”
Wood worries about proposals that limit employers’ tax deductions more so than any that might affect employee contribution taxes.
“Those approaches could be seen as a tax increase in my book, and, whether that’s immediate or down the road, it could create a political backlash,” says Wood.