On his first day in office (January 20, 2017), President Trump signed an executive order to "minimize the economic burden" of the Patient Protection and Affordable Care Act ("ACA") pending its repeal. Although the Order clearly affirms the newly elected President's continued commitment to the repeal of the ACA, its practical significance for employer group health plans remains to be seen, leaving employers with questions regarding what the Order does and does not do, how it impacts their compliance obligations with respect to those plans and what implications it has regarding the "repeal and replacement" of the ACA. These questions are addressed below.
What the Order does and does not do
The Order highlights the new Administration's policy objectives behind the repeal of the ACA – i.e., to minimize the ACA's regulatory burden, afford States more flexibility and control, and create a more free and open healthcare market. It also directs the agencies responsible for the implementation of the ACA to "exercise all authority and discretion" available to them to effect these objectives "to the maximum extent permitted by law", including "waiving, deferring, granting exemptions from and delaying the implementation of" any part of the Act that would impose a financial or regulatory burden on individuals, states, insurers, health care providers and others.
Although the executive directive is very broadly worded, it does not require any specific response by any federal agency. The intended objective of the Order is therefore unclear.
For example, the federal agencies responsible for implementing the ACA could respond to the Order by publishing new regulations or less formal guidance to "un-do" or change existing ACA rules. However, the regulatory process is time consuming due to the abundance of ACA regulation and the public notice and comment requirements to which agencies must adhere when promulgating regulations. Moreover, there is currently a moratorium on regulatory action pending completion of the ongoing transition in federal agency leadership.
Another potential response is for these federal agencies to stay enforcement of certain aspects of the ACA based upon the Order's waiver and exemption provisions. However, those provisions are only available "to the extent permitted by law" and agencies are not generally "permitted by law" to ignore existing ACA statutory and regulatory requirements. Therefore, waivers and exemptions will likely be limited to instances in which the ACA currently allows for them. For example, more leniency could be applied in administering the existing hardship waiver that is available to individuals who fail to secure health coverage and are otherwise subject to a tax penalty.
In any event, the Order is neither intended, nor legally permitted, to repeal the ACA which can only be accomplished by Congressional action (although federal agencies can replace existing ACA regulations and/or interpretive guidance as noted above).
How the Order impacts group health plan compliance obligations
As previously stated, the Order does not include any specific agency directive and it is not clear how the Order's waiver and exemption provisions will be applied by the federal agencies charged with enforcement of the ACA. This includes enforcement of ACA requirements that apply to employer sponsored group health plans. In fact, the Order does not explicitly reference employers or group health plans in the list of individuals and entities that are to receive waivers and exemptions from ACA taxes, fees and penalties – although they could potentially qualify as "health insurers" or "purchasers of health insurance" (which are included in that list). Whether or not the Order is interpreted as applicable to employers and group health plans is a matter that will presumably be determined by the Department of Health and Human Services, Department of Labor and IRS in the near future. Some of the potential group health plan-related ACA taxes, fees and penalties that could be impacted are as follows.
Employer Mandate Penalties. The IRS announced recently that it expects to send letters to large employers in early 2017 to inform them of their potential tax liability for any failure to offer full-time employees and their dependents affordable minimum value health coverage during the 2015 calendar year. These potential penalties would be based upon information that was reported by the employer on IRS Forms 1094-C and 1095-C in 2016. Before sending these letters, the IRS promised to publish guidance describing the penalty payment procedures and to supplement that guidance with other information in order to ensure that employers are properly informed of when and how the IRS will be contacting them. At this point, it is unclear if the Order's waiver and exemption provisions will result in the suspension of this enforcement activity.
Employer ACA Reporting. To the extent that enforcement efforts with respect to employer mandate penalties are suspended, the associated ACA reporting could likewise be suspended. Nevertheless, there is currently no indication that these reporting obligations will be impacted by the Order. Accordingly, employers should plan to issue individual employee statements (Forms 1095-C) by the upcoming March 2 deadline and to file those statements with the IRS (using Form 1094-C) by the applicable deadline (February 28 (paper filing) or March 31 (electronic filing)).
Group Health Plan Related Taxes and Fees. It is conceivable that the $100/day ACA tax penalty that applies to certain group health plan violations (including but not limited to the ACA's contraceptive coverage requirement) may not be pursued as a result of the Order and that the second installment of the transitional reinsurance fee (due in November) as well as the Patient Centered Outcome Research Institute fee (due July 31) could be waived. Again, though, the Order does not (and cannot) accomplish this. Further agency or Congressional action would therefore be necessary to implement any such changes.
Non-discrimination rules for fully insured group health plans and Cadillac tax. The IRS has already suspended enforcement with respect to two ACA provisions affecting group health plans – the non-discrimination rules applicable to non-grandfathered fully insured group health plans and the so-called "Cadillac tax" on employer-sponsored health coverage above certain thresholds. It is presumably safe for employers to assume that neither of these ACA provisions will move forward under the current Administration - irrespective of the Order.
Next steps. Regardless of whether or not the Order ultimately results in less ACA enforcement in the context of employer sponsored group health plans, the Order does not change existing ACA compliance obligations. Therefore, until the impact of the Order is known, or Congressional or agency action changes the existing ACA landscape, employers should continue "business as usual" with respect to their group health plans.
The Order's implications for the "repeal and replacement" of the ACA
In terms of changes to the existing ACA landscape, the Order does not shed any light on the timing of ACA repeal nor the substance of its replacement legislation - although it may put pressure on Congress to act more quickly than it might otherwise have planned. Nevertheless, given that the Administration and Congress have not yet reached a public consensus on replacement legislation, it is difficult to predict how repeal efforts will proceed.
Most recently (on January 13), Congress passed a budget resolution instructing committees to propose legislation by January 27 to repeal the ACA. However, the resolution is not binding, and even if proposed legislation were issued by then, its fate will depend upon various factors that continue to evolve - including the tenuous Senate confirmation of the Administration's nominee to lead the Department of Health and Human Services.
Given the time it could take to hash out the details of ACA replacement legislation, the immediate issue of concern is whether or not to proceed with repeal or to delay it in order to simultaneously "repeal and replace" the ACA – and the substantial consequences associated with each of those alternatives.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
