Coping with the Potential ACA Repeal and Replacement

Healthcare lawyers discuss how businesses can save money in face of changes.


While efforts and pledges to repeal the Affordable Care Act (ACA) began almost as soon as the law was signed seven years ago, more concrete details of what that might entail became evident in March, when House Republicans released plans to replace Obamacare. At press time, issues still have to be resolved in this complex undertaking, but the current proposed changes to the existing law would include:

  • Rolling back the expansion of Medicaid, and starting in 2020, capping federal funding per enrollee, based on how much each state was spending in fiscal year 2016.
  • Offering tax credits ranging from $2,000 for those under 30 to $4,000 per year for those over 60. The full credit would be available for individuals earning up to $75,000 a year and up to $150,000 for married couples filing jointly.
  • Removing the mandate that most Americans have health insurance.
  • Repealing the large-employer mandate requiring employers to offer affordable healthcare or face financial penalties.

On the following pages, healthcare attorneys weigh in on how and when business may be impacted, and what they still can do to control healthcare costs.

“We are in a period of transition, which makes this a challenging and uncertain time for healthcare providers,” says George Kendall, a partner with DrinkerBiddle in Florham Park, who represents numerous clients in the healthcare industry.

“The good news is that nothing is going to change overnight,” says R. Max Crane of Sills Cummis and Gross. “You don’t have to panic. I think the worst thing you can do is overreact, because you don’t know what direction things are going in yet.”

Thomas B. Wassell, a partner at Cullen and Dykman, LLP, agrees: “I doubt anything will be effective in 2017, and since 2018 involves midterm elections, the party in power will likely tread carefully to avoid alienating a large group of voters.”

Lawyers’ initial recommendations for businesses concerned about how changes in the ACA will affect them is to relax, breathe and wait for more detailed information.

“The ACA had such a great impact that designing what comes next is going to be a challenge,” says James A. Robertson, partner and the practice group chair of the healthcare practice at McElroy Deutsch Mulvaney & Carpenter.

“Repeal? Repeal and replace? Repeal and repair? Regardless of anyone’s particular views on the law, it has changed the healthcare financing and delivery landscape, so any of these will have big ramifications,” he says. “Repealing the law without provision for a soft landing would just create a new set of problems.”

For instance, he says, New Jersey budgeted $675 million for charity care for hospitals to treat the uninsured in the 2014 fiscal year, but only $352 million in FY17 because of the drop in uninsured. Some 670,000 New Jerseyans gained health insurance as a result of the ACA, according to an estimate from the Rutgers Center for State Health Policy.

Some provisions of the ACA – requiring the coverage of pre-existing conditions and allowing parents to continue to cover their children until age 26 – have proven so popular it is unlikely they will change. Others are likely to provide more flexibility.

For instance, Crane says it is likely that the Trump administration will allow for more access to insurance across state lines to allow for more shopping for the best price and coverage options. He also says there may be fewer mandates in plans, which will give employers more options for what they decide to include in the plans they choose. Ultimately, it will be up to businesses to determine how much they want to provide in coverage and how much they are willing to pay.

“We are all bottom-line-oriented, some more than others,” Crane says. “Some business may say they can only afford bare bones coverage; others, looking to attract the best and the brightest, may want to continue to offer soup-to-nuts coverage.”

Christine A. Stearns, director of government affairs with Gibbons P.C., says there may be some cost savings for employers in the possible reduction of record-keeping and reporting requirements, if that is part of the changes.

Filling out annual reports have proven to be “a tremendous amount of work, and that cost did not help pay for healthcare,” she says. “To the extent that is relaxed, it would give employers a little more flexibility.”

It may be harder to roll back some of the benefits employees have gotten used to over the last few years that have proven more expensive: unlimited lifetime coverage, for instance. Some employers may not want to cut benefits even if they can.

“Once you have come into compliance, do you do all that work to change coverage again?” asks Stearns. “Employers may desire to continue to offer that good coverage.”

Regardless of what specifically happens to the ACA, there are some tried-and-true ways for employers to control healthcare costs.

One way for businesses to save money will be to raise plan deductibles. Another may be to join or form employer associations to increase the number of employees covered and, presumably, get better rates from insurers, Wassell says.

“In this transitional period, we are advising providers to focus on what is known: governmental and private payers want high quality healthcare for less, patients expect quality care and are price sensitive with respect to out-of-pocket expenses, and the federal government is in a deficit,” Kendall says. “Healthcare providers should continue to innovate with respect to care delivery. They should partner with other high-quality, like-minded providers and healthcare professionals to create better, more coordinated and more cost-efficient delivery systems. They should embrace technology that enables them to provide quality care more efficiently. Providers who can manage risk, create shared-savings opportunities, and deliver value to patients and payers will be in a stronger position irrespective of the federal health policy changes that may come.”

Robertson had similar thoughts.

“Watch out for creative solutions. These can include alternative types of delivery systems including: self-insurance for employers that can bear the risk; multiple employer welfare arrangements where available; different product designs incorporating clinically integrated care delivery, health savings accounts; and health reimbursement arrangements,” he says. “Look at things like wellness programs and on-site health kiosks or clinics that can keep both sick days and coverage costs down.”

As Republicans have spoken favorably of health savings accounts (HSAs), they could figure prominently as a future health payment option, so businesses that do not currently offer them might want to consider adding them.

HSAs are a type of savings account that allows a person to set aside money on a pre-tax basis to pay for qualified medical expenses if they have a “high deductible” health insurance plan. The HSA lets a person pay for some medical expenses, including deductibles and copayments, with untaxed dollars.

Businesses should expect some other, less obvious differences in the delivery of healthcare that could wind up affecting costs.

“We expect that the new administration will continue to drive efforts to improve quality and outcomes, while keeping costs down,” Kendall says. “Innovative delivery system approaches are likely to be encouraged, but not made mandatory. For example, (Secretary of Health and Human Services) Dr. (Tom) Price has expressed concerns regarding mandatory bundled payment programs, preferring instead to give hospitals, physicians and other providers the regulatory flexibility to innovate and drive change.”

Whatever flexibility the new administration may provide, it will be important for employers to consider how to strike the proper balance between cost and coverage: making sure employees have good insurance that is affordable to them and to the company’s bottom line.

Stearns says the changes to the ACA are likely to be as complex to navigate as the original law, so businesses should make sure to keep in touch with consultants and others who manage their benefits to get the best advice on what actions to take.

“It’s important to remain engaged in the conversation and in contact with counsel as changes to the law take shape so that any necessary preparations can begin before implementation of the law,” agrees Robertson. He adds that employers should also make their views known as Congress is debating the issue. “At this point, energy is best spent keeping an ear to the ground and letting their legislators know when they hear proposed solutions that aren’t workable, or that are.”

Regardless of what’s coming, it is almost guaranteed that the cost of providing health coverage is going to continue to rise. The only question is, “How fast?”

“There may be small cost increases that employers are willing to absorb,” Crane says, “and large ones they are going to be sharing with employees.”