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Looking Ahead at the Affordable Care Act for 2015

By: Peter Marathas, Director of Compliance

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On Tuesday, November 4, the Republican party won control of the U.S. Senate and added to their votes in the House. They also managed to win control of 29 state legislatures. Republican gubernatorial wins resulted in Republican governors in 32 states, including Illinois, Maryland and Massachusetts, traditionally blue states. What does this mean for the future of the Affordable Care Act ("ACA")? The state and federal elections plus the U.S. Supreme Court's decision to take up the King v. Burwell case during the current term leads to some interesting speculation.

Is Repeal Possible?

A lot of people will spend a lot of time speculating that the Republicans will repeal the ACA. Indeed, Repealhas been the battle cry for many Republicans seeking election or re-election to House and Senate seats. But it's a hollow battle cry. The reality is that Republicans may not have the votes in the Senate to get past a filibuster that would keep the vote from coming to the floor (they need 60 votes and they seem to shy of that). Even if the Republicans can hold their majority together and persuade some Democrats to join them to get past a filibuster or use some political maneuvering, like reconciliation to pass the ACA, the President will veto any repeal bill that lands on his desk. And the Republicans are a far cry from holding the 2/3rds vote in the House and Senate they would need to override the President's veto.

Repeal vs. Replace

Even if they did have the votes, it is unclear that all Republicans would support a complete repeal of the ACA. Leading Republicans like Orrin Hatch support repeal and replace and have put forth replacement provisions. Many Americans presumably support some key provisions of the ACA. Early implemented provisions like coverage to age 26, elimination of annual and lifetime limits and elimination of pre-existing conditions, while adding some cost to insurance, have been extremely important changes to many individuals and families. Repealing these (and other) provisions of the ACA would, in this writer's opinion, not necessarily make members of Congress popular with the folks back home.

What remains to be seen is whether Congress and the President will work together to amend or change parts of the ACA. True, there have been relatively few instances of bi-partisan efforts to amend the ACA over the past four years, but examples do exist. Repeal of the CLASS Act and the Free Choice Voucher System are both examples.

Speaker of the House Boehner and Senator McConnell, the presumptive Senate Majority Leader, have both expressed an interest in working with the Administration on key issues, including the ACA. On the other side of the aisle, the Administration has indicated a willingness to talk. So anything is possible.

The Impact of King v. Burwell

It is also possible that the Supreme Court's decision to hear the King v. Burwell appeal could prompt both sides to sit down and compromise. At issue in King v. Burwell is whether individuals purchasing insurance on federal Exchanges are eligible to receive subsidies and tax-credits. More than 35 states have federal Exchanges. The problem? The ACA on its face only provides subsidies for insurance purchased in state-established Exchanges. In 2012, the Internal Revenue Service released regulations that provided for subsidies in both federal and state exchanges. The Fourth Circuit Court of Appeals found that the IRS did not exceed its regulatory authority in King v. Burwell by declaring the subsidies to be available in both the state and the federal level.

If the Supreme Court finds that subsidies are not available in federal exchange states, the impact on ACA implementation would be catastrophic: millions of individuals living in federal Exchange states would not be available to afford their coverage because they would lose their subsidies. In addition, employers in these states would be exempt from the ACA's "play-or-pay" penalties, because by law the penalties under the ACA are only assessed when a full-time employee obtains subsidized coverage on the Exchange.

Both sides may well decide that compromise might be better than letting the Supreme Court decide. The Administration is now 2-1 in Supreme Court ACA decisions. They may not want to allow the Supreme Court another opportunity, especially on this important issue, to rule against them. Republicans, particularly Republican governors and state legislatures, should consider whether placing affordable insurance beyond the reach of millions of voters makes sense politically.

King v. Burwell should provide both sides an impetus to compromise. Potential areas of compromise would appear to be repealing the medical device tax and changing the definition of full-time from 30 to 40 hours per week.

Looking Ahead

Finally, any review of the elections (and post-election activity) would not be complete without considering the impact of the state elections. ACA implementation happens on the ground.  Republican governors and Democratic governors in states controlled by Republican legislatures may more closely review mandates and directives from the federal government. This scrutiny may well slow down or otherwise hamper implementation efforts.

The days ahead will be as interesting as the days behind with respect to the ACA.

Posted November 17, 2014

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