Brooks Blog

Monday • January 23, 2017

ACA Repeal

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ACA Repeal: Is President Trump’s Executive Order Huge?

President Trump made it clear that repealing the Affordable Care Act (ACA, or “Obamacare”) was his first priority by signing an executive order that instructed federal agencies to ease the ACA’s burdens on constituents just hours after being sworn into office. This took place the week after the senate approved a budget blueprint to dismantle the ACA through a budget reconciliation process. ACA repeal does seem imminent.

But what does the executive order mean? In summary, it’s more than a symbolic gesture but far less than the promise of “repeal and replace”. (Trump recently promised to achieve “repeal and replace” very quickly, even suggesting that both a repeal and replacement legislation could happen this week.)

Although the actual potential for federal agencies to implement the instructions in the executive order is uncertain, some report that the order may destabilize the entire insurance industry. (Read more here)

The Individual Mandate and the Executive Order

The piece of the ACA that is most under threat due to the executive order is the individual mandate, which is a key component of the health insurance marketplaces –the part of the law that requires all citizens to have health insurance or face a penalty –would require legislative action, not an executive order.

However, by instructing agencies to “reduce the hardship” on constituents, there is every likelihood it will become easier to apply for a hardship waiver and not buy insurance. Individuals most likely to seek a waiver are healthier, leaving a higher risk pool in the health insurance marketplaces.

In short, due to this executive order, it is possible insurers will either increase premiums drastically and/or exit the marketplace exchanges in droves in 2018. Combined with the potential loss of funding for federal subsidies and possible loss of protections for those with pre-existing conditions, these changes could render insurance unaffordable for many individuals, according to the nonpartisan Congressional Budget Office (CBO).

Who, When and How a Repeal Will Impact Healthcare Stakeholders

Other key components of the law – the federal funding for Medicaid expansion, the law against insurers charging more based on gender or pre-existing conditions, and the Ten Essential Benefits –could be changed or eliminated by a repeal of the ACA, which would impact all covered individuals, including those receiving employer-sponsored plans, by allowing plans with higher cost sharing and lower benefits to be sold.

It could also take its toll on healthcare vendors and workers. According to this report by the Commonwealth Fund, the end of marketplace exchanges and federal funding for Medicaid expansion risks the loss of 2.6 million jobs in 2019, and creates new healthcare costs to states due to the loss in federal funding for Medicaid expansion, which may cause states to reduce employment in other sectors.

Providers have been on both sides of the ACA debate, sometimes lauding the efforts of the legislation to create universal coverage and other times struggling with administrative reporting burdens created by the legislation.  While they may be relieved by the elimination of some or all of these burdens, hospitals are likely to be hit hardest by the loss of reimbursement funds for treating low income patients who could lose coverage and not be able to cover the costs themselves.

Meanwhile, pharmaceutical manufacturers are looking at uncertain fiscal impacts from a possible repeal: the Branded Prescription Drug Fee tax that manufacturers pay could be repealed, which will ease the tax burden on manufacturers. However, Trump repeatedly said during his campaign that he would allow easier importation of drugs and even suggested Medicare should be able to negotiate drug prices, two policy changes that would hit domestic manufacturers’ bottom line.

When Will the Impacts Roll In?

The executive order impacts are already being felt by a turbulent healthcare insurance industry and state policymakers, including Republican governors concerned about the impacts of a repeal on hospitals and state budgets. Meanwhile the budget reconciliation bills need to be drafted by January 27th, according to the New York Times. Any actual repeal will need to be approved by both the House and the Senate, which is highly contested at this point.
To ensure their business strategy aligns with these changes, all healthcare stakeholders will need to track these momentous changes closely until replacement legislation is proposed, voted on by the senate and house, and signed into law by President Trump. 

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