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What the End of Obamacare Means for Business Leaders

White HouseAfter a turbulent election season, all eyes on are now on the President-Elect Donald Trump and Speaker of the House Paul Ryan for health care reform. Trump and Republicans in Congress made repealing and replacing the Affordable Care Act (“Obamacare”) a signature campaign issue. While Trump avoided offering specifics during the campaign, he did stress the importance of health savings accounts and opening markets across state lines to empower “maximum choice and freedom for the consumer.”

In late November, Trump’s transition team announced that Representative Tom Price, a six-term Republican congressman and former orthopedic surgeon, would be Trump’s nominee for secretary of health and human services. Price is a strong pick for supporting Trump’s goal to end Obamacare. The Congressman has been introducing bills offering a detailed, comprehensive replacement plan in every Congress since 2009, when Democrats first started to work on the legislation.Health Care Management

What Will Replace the Affordable Care Act?

Since President-Elect Trump has yet to release any specifics on health care reform, health policy analysts are now focusing on plans proposed by Price and Ryan.

Earlier this summer, Ryan unveiled his proposed replacement plan for the Affordable Care Act. While the plan will keep many of the same provisions offered by Obamacare – protecting people with pre-existing conditions, offering tax credits to help make insurance more affordable – Ryan would eliminate the individual and employer mandate to buy insurance. Ryan’s plan reflects the conservative view that creating a competitive market place will ultimately lead to better quality and more affordable insurance.

“Don’t force people to buy insurance,” Ryan told the crowd at AEI when he announced his plan in June. “Make insurance companies compete for our business.”

Many of Ryan’s proposed changes come from Price’s proposed “Empowering Patients First Act”. In addition to repealing ACA, key provisions of this act include:

–Offering age-adjusted tax credits for the purchase of individual and family health insurance policies

–Create incentives for people to contribute to health savings accounts

–Offer grants to states to subsidize insurance for “high-risk populations”

–Allow the sale of insurance across state lines (insurers licensed in one state could now sell policies to residents of other states)

–Authorize business and professional groups to provide coverage to members through “association health plans”

At this time, neither Ryan nor Price’s plan include detailed specifics on the amount of tax credits available to subsidize premium costs or the level of insurance that would be tied to these credits. Instead, both have focused on lowering costs through tax-free health savings accounts. Individuals, the government or employers would be able contribute to these accounts, which are designed to keep costs lower for young, healthy adults.

Can Anything Be Done About the “Death Spiral”?

One criticism of the current health exchanges is that there are not enough incentives for young, healthy adults to stay in the insurance marketplace. However, if there’s no mandate to buy health insurance, it’s unclear why younger adults would choose to stay in the insurance marketplace. Including young health people (so-called “young invincible”) in the insurance marketplace is essential to balancing the higher costs associated with care for older, sicker Americans. When there aren’t enough healthy members of the marketplace, premiums rise and scare even more healthy people away, further exacerbating the problem. This is known as the “death spiral”.

UnitedHealth announced earlier in 2016 that the insurance giant had lost close to $1 billion on its ACA plans and would be pulling out of many marketplaces in the coming year. Insurers across the board have struggled with marketplace plan pricing, with many initially underpricing to gain a larger portion of market share. A lack of young, healthy plan participants compounded this problem. In 2014, only 28% of exchange members were in the “young invincible” range of 18-34 years– and that percentage remained steady into 2016. Actuaries say the market place needs at least to boost that membership to at least 40% in order for rates to remain stable.

Even with the individual mandate to buy insurance, the current exchanges struggle with this problem. It remains to be seen if health insurance savings accounts will be enough to incentivize healthy adults to continue purchasing insurance once the mandate is eliminated.

State Innovation Waivers and Single-Payer Health Care: Dead on Arrival?

Starting in 2017, states will be able to purchase “Innovation Waivers” (also known as 1332 waivers) that allow them to modify parts of ACA. But as I discussed back in October, most states have found the Innovation Waiver program confusing. Only a fraction of states including Hawaii, Massachusetts and Vermont have publicly released waiver applications. With the future of the Affordable Care Act up in the air, so too is the willingness of states to pursue “Innovation Waivers.” For now, states are following a “wait and see” approach in response to the Republican’s pledge to end Obamacare.

The Future of state-based single payer health care also remains uncertain. The proposed “ColoradoCare” ballot initiative would have created a resident-owned, non-governmental health care financing system. Currently, only about half of Coloradans receive health insurance from their employers. Those who don’t must purchase it from the state exchange or face a penalty. In the volatile state marketplaces, ballot initiatives like ColoradoCare could demonstrate a new way forward for states. But Coloradoans soundly voted down the ballot initiative on Election Day.

While the program promised to provide health care to all state residents regardless of their ability to pay, concerns remained over the program’s management structure and a proposed increased tax burden on employers. Ultimately, a bipartisan effort defeated the initiative. Single-payer health care is dead for now in Colorado and with Republicans in charge of the White House and Congress, the focus is now on individual payments.

What’s Next for Health Care Reform?

While Republicans maintained control of both the House and Senate, a diversity of views within the party may continue to pose challenges to the leadership. Furthermore, Republicans lack the supermajority necessary to defeat a Democratic-led filibuster against an outright repeal. Instead, Republicans may seek other avenues through the budget reconciliation process. This allows Congress to reconcile a previously adopted budget resolution without the supermajority needed to pass new legislation. This would allow Republicans to eliminate the individual and employer mandates to buy health insurance. Republicans could also use the budget process to eliminate the so-called “Cadillac Tax” on certain coverage plans (although this tax has already be delayed until at least 2020).

In my next article, I’ll look at which changes business owners should anticipate, including the end of the employer and individual mandate as well as removing the prohibition on employer stand-alone health reimbursement arrangements (HRAs) and eliminating fees like the Patient Centered Outcomes Research Institute Fee.

Scott Foster is President of Wellco.  Scott and Wellco have provided award-winning systems to measurably improve health conditions and costs.  Wellco specializes in engagement, metrics, integration and high-value care.  For more information visit, www.Wellcocorp.com

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