November 15, 2016
By Maryelizabeth Zacharias, DIA
EVP, Client Experience & Benefits Practice Leader
Trump winning, and the Republicans controlling Congress, the landscape is definitely favorable for allowing a quick and seismic change or possible repeal of ACA, especially considering that Trump will be filling the open Supreme Court seat.
If Trump does what he has said he will do, which is repeal ACA in its entirety. Doing so allows us to assume that anything short of that should have a lesser/slower impact on our book and the industry than a total repeal. For our purposes, when looking at ACA, there are two main components: 1) the employer mandate, which requires employers with more than 50 full time equivalents to offer insurance that is affordable and actuarially sound, and 2) the individual mandate, which requires people to insure themselves or pay a penalty. If ACA were to be repealed, these mandates would no longer be reality.
Employer mandate, as such Welfare Funds would no longer be legally required to offer insurance to their employees at all. This takes us back to the pre-ACA days. The employer mandate never really had the impact on Welfare Funds’ members or philosophies towards benefits programs that the administration anticipated. In short, Welfare Funds have offered coverage, and will continue to offer coverage, not because they have to, but because they either feel they need to for competitive reasons or because they want to. This is evidenced by the fact that the vast majority of Welfare Funds with less than 50 full time equivalents continued to offer insurance when they didn’t have to. On top of that, for many large Welfare Funds, it made economic sense to drop coverage and pay a penalty, and yet almost none did. Both groups continued to offer coverage even if it didn’t make economic or strategic sense. They saw more value and need to offer plans, than not. This doesn’t change with the repeal of the employer mandate. As a result, we are likely to see a continued trend of greater emphasis on Welfare Fund-sponsored benefits programs.
As for the individual mandate, this could actually be an opportunity for everyone. Trump’s strategy involves creating more competition by allowing insurers to sell insurance across state lines and by placing a greater emphasis on leveraging competitive pricing of oversees drug manufacturers, among other initiatives. Additionally, he is an advocate of allowing individuals to tax deduct the premiums they pay. If these dynamics can help to create a better risk pool, which in turn should drive lower prices then we could see a revitalization of individual health insurance. It’s sort of a chicken and egg scenario, though. We need lower costs to create a larger, healthier risk pool. At the same time, we need a larger, healthier risk pool to create lower costs.
In closing we are likely not going to see a single-payer system becoming reality any time soon.