The Problem With Repealing the ACA Before the Replacement Is Written

It's more complicated than having repeal and replacement eventually coincide

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When Donald Trump won the presidential election in November 2016, the future of health insurance in the U.S. was suddenly very much in limbo—just when people were starting to get used to the Affordable Care Act (aka, Obamacare).

There is no doubt that the implementation of the ACA had plenty of bumps over the last few years, but it had become well entrenched by late 2016. The fourth open enrollment period in the individual market (on and off-exchange) was underway. Employers were heading into their second or third year (depending on their size) of complying with the ACA's employer mandate. Individuals were becoming accustomed to questions about health insurance coverage on their tax returns, and a potential penalty for folks who were uninsured during the year.

People had gotten used to the fact that pre-existing conditions are no longer an obstacle when applying for health insurance, and to the fact that for folks who buy coverage in the individual market, subsidies are available to offset the cost, depending on income (this helped to level the playing field for people who buy their own health insurance, since people with employer-sponsored health insurance have always had significant subsidies).

Then suddenly, everything was up in the air. President Trump campaigned on the promise that he would repeal the ACA; his campaign website said, "On day one of the Trump Administration, we will ask Congress to immediately deliver a full repeal of Obamacare."

Republicans retained their majorities in the House and Senate, and have been pushing to repeal the ACA ever since it was enacted in 2010. Their previous efforts had been thwarted by President Obama's veto pen, but that's no longer an obstacle under the Trump Administration.

Repealing the ACA Isn't as Simple as It Sounds

As soon as the 2017 legislative session got underway, Senator Mike Enzi (R, Wyoming), Chairman of the Senate Budget Committee, introduced a resolution (S.C.Res 3) to begin the process of repealing the ACA using budget reconciliation. Enzi's resolution provides instructions to four committees to work out legislation, including deficit reductions, that is to be reported to the Budget Committee. Both chambers of Congress had passed S.C.Res 3 by mid-January, and congressional committees have been working on the details of repeal legislation since then.

Congressional Republicans plan at that point was to pass the resulting reconciliation bill as soon as possible. Expectations were that it would be similar to H.R.3762, which passed in early 2016 but was vetoed by President Obama.

To be clear, they do not have the votes needed to pass a full repeal of the ACA, as that would require at least 60 votes in the Senate in order to overcome a filibuster. But a reconciliation bill—one that addresses only federal spending—can pass with just a simple majority, and is not subject to filibuster. A reconciliation bill to defund the ACA could pass with 51 Senators voting in favor of it, and there are 52 Republican Senators in 2017.

Premium subsidies, cost-sharing subsidies, and Medicaid expansion could all be eliminated with a reconciliation bill. So would ACA taxes like the employer mandate penalty, the individual mandate penalty, and things like the medical device tax and the yet-to-be-implemented Cadillac Tax.

A reconciliation bill would not be able to repeal non-spending-related parts of the ACA, like guaranteed-issue coverage (regardless of medical history), essential health benefits, and allowing young adults to remain on their parents' health plans until age 26. But if the ACA is defunded, the remaining parts of it would not survive unless additional legislative action was taken to stabilize the insurance market.

What Comes Next?

Congressional Republicans have moved quickly to begin the process of repealing the ACA via defunding it, but have not yet coalesced around a replacement proposal. Numerous GOP proposals to replace the ACA have been introduced over the last few years, including House Speaker Paul Ryan's "A Better Way" proposal, and Tom Price's Empowering Patient First Act of 2015 (H.R.2300)—which took on new importance when Price was nominated to lead HHS under the Trump Administration (the Senate confirmed his nomination in February 2017). The proposals tend to have a lot of points in common, so we have a fairly good idea of the direction in which Congressional Republicans want to proceed.

Several new bills have been introduced in the early weeks of the 2017 legislative session, generally following many of the same principles outlined in earlier Republican health care reform proposals. But none of them have gained bipartisan support or even full support from the Republican side of the aisle.

In short, the specific details of what could replace the ACA are not yet available. Some Americans are better off under the ACA, and some are worse off, but none of them have had a chance to see exactly what the replacement would look like. And perhaps most importantly of all, the health insurance and health care industries aren't certain what comes next.

Congressional leaders have said from the beginning that there would be no gap in coverage. Although they've repeatedly said that their plan is to repeal the ACA as soon as possible, they have no intention of having the repeal take effect immediately. A delay of two to four years for repeal implementation is likely, meaning that they could vote to repeal the ACA in early-mid 2017, but have the repeal take effect sometime between 2019 and 2021.

The reason for the delayed repeal implementation is to give lawmakers a chance to work out the details of a replacement bill, pass it, and have time to get all the pieces in place for it to be implemented simultaneously with the ACA repeal. Rep. Chris Collins (R, New York), who is a member of the Trump Transition team, said in early January 2017 that the replacement legislation would likely be introduced by June or July 2017. He reiterated the fact that nothing would change about health plans in 2017 or 2018, but said that immediate repeal of the ACA was necessary because lawmakers were planning to immediately repeal things like "the medical device tax, the health insurance tax on insurance companies, the employer mandate, the employee mandate [referring to the individual mandate]."

House Speaker Paul Ryan (R, Wisconsin) has said that he expects the repeal vote to happen by March or April, but President Trump, who had initially been talking about a repeal vote by the end of January, mentioned in early February that the repeal vote might not happen until 2018.

What Constituents Are Told

The message that Congressional Republicans have put forth is certainly appealing to a lot of Americans:

  • Repeal the ACA, but with an extended time frame so that people don't lose their coverage while waiting for a replacement.
  • A replacement plan that lawmakers have promised will be better than the ACA (although without seeing the actual legislation, people just have to take their word for it), and which will be scheduled to take effect simultaneously with the repeal of Obamacare, with no gap in between.
  • Immediate repeal of some of the ACA's taxes, including the employer mandate and individual mandate, both of which have been quite unpopular.

What It Actually Means

It certainly sounds good. But when we look under the hood, there are a few missing pieces. The Congressional Budget Office projected that the ACA's employer mandate and individual mandate penalties, along with the Cadillac Tax, would bring in $297 billion in revenues from 2016 to 2025. Those revenues are used to help offset the cost of the ACA, which includes federal spending on premium subsidies and Medicaid expansion.

If those revenue-producing elements of the ACA are eliminated in the near future, it could end up being financially challenging to continue to provide the subsidies and Medicaid expansion.

But there are other serious problems that could arise if Congress votes soon to repeal the ACA (even with a delayed implementation) and then waits several months to introduce replacement legislation. Two of the most significant are the destabilization of the individual health insurance market and the possibility that a replacement bill might never pass.

What Do You Mean, "Destabilization of the Individual Health Insurance Market"?

The open enrollment period for 2017 coverage just ended, but health insurance carriers are already very focused on planning for 2018. For carriers that wish to offer plans in the federally-facilitated marketplace (ie, in 2018, rates and plan designs have to be submitted by May 3, 2017 in states where the federal government conducts the rate review process (Missouri, Oklahoma, Texas, and Wyoming), and by July 17 in the remaining states.

If ACA repeal legislation has already passed by that point, but the replacement hasn't been introduced and/or passed, health insurance carriers would be facing considerable uncertainty in terms of their long-range planning.

It's equally concerning to carriers if nothing happens at all in terms of legislation—including repeal legislation—by the time rates and plans have to be filed. The carriers know that everything is up in the air, that repeal is on the table, and that replacement is uncertain.

Some carriers might go ahead and file rates and plans for 2018 (most likely with higher rates that they would have filed without the uncertainty currently surrounding the individual market). But others might decide that the uncertainty is too much of a risk, and simply opt to exit the exchanges or the entire individual market at the end of 2017.

If the individual mandate is eliminated but coverage is still going to be guaranteed-issue in 2018, it's easy to see why insurers might balk at the idea of continuing to participate in the exchanges. In that case, it would be easier than ever for healthy people to go without coverage, and the risk pools would become further tilted towards sicker enrollees, meaning insurers would need to either not participate at all, or participate with much higher premiums.

The Trump Administration has said that they'll be issuing regulations aimed at stabilizing the individual health insurance market, but it remains to be seen whether the regulations will be enough to keep insurers in the market for 2018, and to prevent premiums from spiking dramatically.

For most health insurers, the individual market is a very small slice of their overall business. The bulk of their business tends to include group plans (or acting as administrators for self-insured large group plans), Medicare Advantage plans, and Medicaid managed care plans. Exiting the individual market is not a decision that they take lightly, but it's also not a decision that would impair their overall performance in the long run.

If a Replacement Is Never Passed

The other problem with repealing now (with a delayed implementation) and then working to develop a replacement is that the replacement might never get off the ground. Maybe Congress can't agree on the design of the replacement, or maybe they can't make the numbers work in terms of government spending on the replacement plan.

As evidenced by the long, challenging process of debating and passing the ACA back in 2009/2010, it's clear that getting agreement around a new health care reform bill is not going to be easy.

And what happens if they just can't get anything passed in terms of replacement? In that case, the repeal bill would still be in place, with full implementation set for 2019 or later. And if there's nothing there to replace it, the market destabilization described above would become even more dramatic, since some aspects of the ACA (like guaranteed-issue coverage) would still be in place, while others (like the individual mandate and premium subsidies) would be eliminated.

Between 20 million and 30 million people would likely lose their insurance coverage if the ACA were repealed and not replaced with something equally robust. The Congressional Budget Office estimated in January 2017 that 18 million people would lose coverage in the first year after a bill resembling H.R.3762 was passed, and that the number of people losing coverage would grow to 32 million over a decade.

Trump Says Legislation Will Be Simultaneous

Amid the uproar about the two pieces of legislation being introduced several months apart, Several Republican senators began to express doubt over the strategy. Rand Paul (Kentucky) Lamar Alexander (Tennessee), and Tom Cotton (Arkansas) have all said it would be better to delay the repeal vote until the replacement plan is available. There is a small but growing chance that an immediate repeal bill might not pass if replacement legislation isn't ready to go at the same time.

During a January 10 press conference, Trump said that the bills to repeal and replace the ACA would be introduced "essentially simultaneously" after Rep. Price is confirmed to lead HHS (Price was confirmed on February 10). Trump elaborated a bit, saying "It will be various segments, you understand, but will most likely be on the same day or the same week, but probably the same day. Could be the same hour."

That puts considerable pressure on lawmakers to come together around a replacement plan as quickly as possible, but that might be easier said than done. For now, the future of the ACA remains up in the air. But when pundits talk about how there's no problem with "repeal and delay" because the new plan would eventually kick in just as the ACA is phasing out, keep in mind that it's a lot more complicated than that.

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