Healthcare Reform to Travel Down One of Three Paths

Talk about the “repeal and replace” of the Affordable Care Act (ACA) has been circulating throughout the industry and in the media for months now.  Repeal and replace are actually two very different concepts in terms of affecting different aspects of the ACA. There’s also a third possibility that would be synonymous with “repair”. No matter the term or path, the outcomes therefore, would have vastly different consequences for every group involved – insurers, providers, hospitals, employers, etc.

Three Futures of the ACA

Although there are three paths lawmakers can take, there are many, many ways no matter which path they take, to enacting what they decide on. Meaning even once a decision is made it could be rolled out in a piecemeal approach under various administrative actions, stand-alone legislation or through state legislature moves.

Repeal Only

Looking at the first scenario this would essentially “repeal” the ACA budget-related provisions through a special budget process called reconciliation and not provide any health-reform replacement provisions. According to the Congressional Research Service paper, there are several aspects of the ACA that could be impacted by reconciliation in a repeal scenario:

• Repeals the individual and employer mandate penalties
• Eliminates the 40% excise tax for employer-sponsored “Cadillac Plans”
• Repeals federal government subsidies for individuals to purchase exchange coverage
• Repeals Medicaid expansion
• Restores Disproportionate Share Hospital Funding

Repair

The second path lawmakers could take would be to “repair” the ACA, keeping most of it intact and making adjustments to a few of the provisions through the legislative process. ACA items that may be repealed/revised under this scenario are:

• Repeals the employer mandate
• Revises the individual mandate through a replacement option, such as a continuous coverage mechanism
• Expands health savings account usage
• Funds high-risk pools
• Expands Medicaid, giving state more flexibility in plan design
• Widens age-rate bands, increasing higher and lower rating flexibility

Replace

Lastly, the ACA can be “replaced” by one of several current proposals being considered by lawmakers. There is widespread concern that repealing the ACA without providing any replacement plan could cause destabilization in the markets, particularly in the individual market. Plans vary to the degree of addressing the following efforts:

• Repeals individual mandate
• Replaces income-based tax credits with age-based tax credits
• Funds high-risk pools
• Transforms Medicaid into block grants
• Restores Disproportionate Share Hospital Funding

Conclusion

The health industry and employers need to consider the above scenarios and prepare their businesses accordingly. Companies will need to be flexible and resilient as the market undergoes future changes.  The evolving landscape will create a new healthcare environment for everyone.

Source: PwC Health Research Institute and Strategy&.  Health Reform 2.0: A guide to developing resilience amid an uncertain future for the Affordable Care Act.  April 2017.