Both sides agree that the Affordable Care Act needs to change for sustainability, but no one seems to agree on how. One plan isn't supportive enough, another too expensive (and this porridge is too hot, and this bed too hard...). Like the blonde fairytale character, Congress has three options in front of them: the plan proposed during the president-elect's campaign, the House GOP Proposal, and the Price proposal. Each will have effects far beyond the ACA marketplace, and benefit pros will keep each in mind as they start their planning for 2018.
1. Trump's Campaign Proposal
Instead of relying on penalties, the president-elect proposes to incentivize participation through spending rebates and savings accounts, as well as tax cuts for both individuals and businesses. In the larger economy, his plan would reduce federal income by $2.6-$3.9 trillion (depending on other key policy provisions). In turn, it would lead to at least 0.8% higher after-tax income for all taxpayers and 10.2-16% higher after-tax income for the top 1% of taxpayers.
This plan focuses on controlling healthcare costs through a combination of tax credits and a more open marketplace. Should this proposal pass in its entirety, participants would not be limited to their own state's marketplace for purchasing coverage. Instead, it would be possible to purchase coverage from any state. In addition, it would limit the protections for pharmaceuticals. US healthcare participants would be able to import medication from other countries, where it may be significantly less expensive.
A key provision of the plan (which is shared in some part by all three plans) is the expansion of HSAs, which Trump's proposal mentions specifically. With this plan, HSA funds could be spent by any member of a participant's family. In addition, HSA funds could be included in an individual's estate. This reflects the national turn toward high deductible plans.
Aside from eliminating barriers between state healthcare marketplaces, this plan would deregulate several other areas of the industry. Trump has been an outspoken critic of the DOL Fiduciary Rule, and his plan would delay or possibly completely eliminate the regulations. In addition, he would loosen executive compensation rules. IRS guidance and audits would experience significant cutbacks as well.
2. The House GOP Proposal
House Republicans agree with many of Trump's points regarding deregulation, but are significantly less insistent on repealing every measure of the Affordable Care Act. The GOP plans on keeping some key successful points of the ACA. The new plan would continue to prohibit pre-existing condition exclusions and require standard premium rates for those with prior continuous coverage. In addition, dependents up to age 26 would still be able to remain on a parent's health insurance plan.
Along with allowing participants to purchase plans from other states, the GOP plan also makes it easier for states to enter interstate compacts for pooling. It also contributes $25 billion in federal funding for state risk pools, stabilizing some of the issues causing insurers to withdraw. In addition, the proposal would set up a separate marketplace for Medicare beneficiaries. Participants would be able to choose between private or traditional Medicare. Further changes to Medicare include the combination of Parts A and B as well as increasing the eligibility age to align with Social Security.
In line with Trump's approach, the GOP proposal would modify the rules for wellness programs. Currently, if a plan collects health information from participants, the wellness reward limit is 30% of the plan premium. Under the GOP plan, that would increase to 50%. The GOP also agrees with some points of Trump's proposed HSA expansion and would increase flexibility in fund usage.
3. The Price Proposal
Tom Price, Trump's pick for the head of the Department of Health and Human Services, has some ideas of his own for replacing ACA. In fact, he's proposed his plan several times as a House Representative. Like Trump and the GOP, Price promotes expansion of HSA usage as a core element of his plan, and his expansion proposal is the most detailed of the three. Price would increase the maximum annual contribution, provide a one-time credit to accounts to get participants started, allow rollovers from FSAs to HSAs, and allow Medicare Part A and Tricare participants to contribute to HSAs.
When it comes to health insurance plans, Price's proposal heavily favors choice. Like the other two plans, Price's would allow participants to purchase insurance from marketplaces in other states, but that's far from the full scope. It goes so far as to allow individuals to decline Medicare, Medicaid, TRICARE, and Veteran benefits in favor of receiving credits. His plan would provide annual credits (adjusted for age) to purchase individual market policies, and it would allow employees to purchase plans on the marketplace with pre-tax dollars.
One interesting note not mentioned in the two other ACA alternatives is Price's vision for small business participation. In an effort to increase employers participating in the insurance marketplace, Price's plan would allow individuals and small businesses to form together to purchase insurance as a group. Brokers should be keeping a close eye on this provision; if it's part of the final plan, employers that were previously too small to provide insurance will need a broker's guidance as they start offering new benefits.
Other plans touch on Medicaid, but Price places a heavy focus on repealing Medicaid expansion. He would eliminate all ACA Medicaid and CHIP provisions, instead relying on the government tax credits to purchase health insurance. In addition, he would eliminate restrictions on some physician charges for Medicare participants. Like Trump's plan, Price's plan aims to stabilize the marketplace by decreasing regulation and incentivizing participation.
Notably, Price's plan does not allow adult children up to age 26 to stay on their parents' health insurance. Trump and the GOP both agree on keeping this provision of the Affordable Care Act, so it will be interesting to see how this plan evolves.
It's not clear yet which proposal Congress will feel is just right, or if any of them will be the final word on the Affordable Care Act. Whichever plan (or combination and compromise of plans) passes, ACA and the benefits industry are in for a shakeup. Subscribe here to be the first to know about new legislation as it passes.
This is a follow-up to our recent webinar, hosted by benefits attorney Larry Grudzien. Watch the replay here.