As we process the results of Tuesday’s national elections, we begin to consider the impact on the employee benefits industry for 2017 and beyond.
With Donald Trump set to take office in January, and with Republicans having control of the House of Representatives and Senate (simple majority), there is a strong probability of significant change for our industry. The list of unknowns is long, including whether there will be any modifications to the existing IRS tax code for employers and individuals. While I claim no insider knowledge or skill of prognostication, I attempt here to offer a reasonable and practical assessment of potential developments affecting employers and advisors.
Regarding the ACA as a whole, I see the initial question as this: Was the “repeal and replace” language from Trump and Congressional Republicans an action plan, or was the language simply routine election posturing? Certainly Congress has the power to repeal the ACA in 2017 without threat of presidential veto. However, it remains to be seen whether Congress will act, particularly since there is not yet a unified replacement plan from Republicans. I have not heard or read about a detailed plan from Congress or Trump that would be viable for passage within a short amount of time. That said, certainly now exists an opening and opportunity for such a plan to be formulated in coming months. That will likely answer the question about repeal of the ACA, since in the absence of a replacement plan, full and immediate repeal of the ACA would appear to be a precarious step given current market dynamics. Also, it cannot be understated the amount of complexity and work that unwinding the ACA will require after 6.5 years.
Regardless of the specific process and timing, it is my opinion that several of the major components of the law – including the employer mandate – will likely go away in 2017. Whether that will happen immediately or over a period of time, I do not know. Congress could act soon or could take time and allow the ACA to stay in place during a transition period. Alternatively, even in the absence of formal action by Congress, Trump will have the authority to direct agencies in the executive branch (including IRS, DOL, and HHS) to not enforce the law in whole or in part. This non-enforcement authority could be used in a number of substantive areas, particularly if Congress and the new president are not immediately on the same page in terms of priorities and action steps. (As a side note, the same applies to the new DOL overtime rules set to take effect December 1 under the Fair Labor Standards Act.)
The future of the Health Insurance Marketplace certainly appears uncertain. On the day Trump assumes office, there will be approximately 13-14 million Americans with coverage through the federal and state exchanges, including approximately 85% with federal premium subsidies. The Marketplace and the individual mandate will likely be a package deal, and whether they are terminated during 2017 or phased out over time will have a sizable impact on not only individuals but the market as a whole.
Again, what is known right now is much less than what is unknown. However, for employers, initial analysis points to a potential reprieve related to at least the employer mandate. For advisors, initial analysis points to substantial changes ahead, which certainly will include a demand for quality education and communication with employers as has been required since the birth of the ACA in 2010.
Two final thoughts regarding secondary items:
- The Cadillac Tax is history. I expect that to be part of initial action by Republicans in 2017 even if the ACA is not repealed in its entirety; and
- While there have been perceived threats to ongoing viability of Health Savings Accounts (“HSAs”), it is likely that we’ll see an expansion of HSAs under Trump and the Republican Congress. At minimum, HSAs should continue their steady growth rate.
If you would like to read some of the opinions coming from experts in other areas of the country, among the items I have read since the election include these two short reads: (1) a summary projection from St. Louis-based law firm Bryan Cave; and (2) an assessment of potential ACA market impact by health policy expert Paul Keckler.
Obviously this topic will be a major focus not only between now and presidential inauguration on January 20, but throughout 2017. I will do my best to keep you informed of developments impacting employers and advisors.
Note: This update is intended as an objective assessment of potential issues from a benefits compliance perspective. Any comments that appear to endorse or criticize any candidate, elected or defeated, are unintentional.