On January 20, 2017, Donald J. Trump became the 45th President of the United States.  Consistent with his campaign promises to act swiftly to “repeal and replace” the Patient Protection and Affordable Care Act (“ACA”) (Public Law 111-148) and as telegraphed by Vice President Mike Pence earlier this month, his first act as President was to execute an Executive Order intended “to minimize the unwarranted economic and regulatory burdens of the [ACA], and . . . to afford the States more flexibility and control to create a more free and open healthcare market.” 

Practical Implications of the Executive Order

While the Executive Order sends the message that dismantling the ACA is a top priority of the Trump Administration, the Executive Order, on its own, does not change the current law. 

The Executive Order gives the regulatory agencies charged with enforcing the ACA, including the Department of Health and Human Service (“HHS”) and the Department of Treasury, latitude to interpret the regulations promulgated under the ACA in a way which minimizes their impact, providing that “[t]o the maximum extent permitted by law, the Secretary of Health and Human Services (Secretary) and the heads of all other executive departments and agencies (agencies) with authorities and responsibilities under the Act shall exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the Act that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications.”  Accordingly, the practical implications of the Executive Order will not be clear until such agencies take action.  It is anticipated that pursuant to this Executive Order, such agencies will use their regulatory authority to lessen the impact of the “individual mandate,” which requires that most Americans have “minimum essential coverage” through a health insurance plan or pay a fee, unless they qualify for financial hardship.  Such potential actions may include expanding the financial hardship exemption or limiting or eliminating the enforcement of the fee. 

Interstate Health Insurance Coverage

The Executive Order also provides that “[t]o the maximum extent permitted by law, the Secretary and the heads of all other executive departments and agencies with authorities and responsibilities under the Act, shall exercise all authority and discretion available to them to provide greater flexibility to States and cooperate with them in implementing healthcare programs.” The Executive Order further provides that “[t]o the maximum extent permitted by law, the head of each department or agency with responsibilities relating to healthcare or health insurance shall encourage the development of a free and open market in interstate commerce for the offering of healthcare services and health insurance, with the goal of achieving and preserving maximum options for patients and consumers.”  While this language is consistent with President Trump’s pledge to break down barriers to providing health insurance coverage across state lines, it is unclear what action will be taken to implement the pledge.

Budget Reconciliation: The First Step Towards Repeal

On January 12 and 13, 2017, prior to President Trump entering office, the Republican-controlled Congress took the first step toward repealing certain provisions of the ACA, voting to adopt a fiscal 2017 budget resolution (the “Budget Resolution”) containing a “reconciliation directive” to House and Senate committees to prepare ACA repeal legislation by January 27, 2017.¹  The Budget Resolution authorizes the implementation of legislation repealing portions of the ACA but does not affect the repeal of any provision of the ACA on its own.  If such legislation passes both the House and the Senate, then the reconciliation measure will be presented to President Trump for signing. 

The budget reconciliation process allows Congress to repeal provisions of the ACA that affect spending and revenue and avoids filibusters.  Accordingly, many of the central aspects of the ACA that are budgetary, including the individual mandate, may be repealed by the vote of only a simple majority in the Senate.  A full repeal, and any comprehensive replacement legislation outside the budget reconciliation process, would require 60 votes in the Senate, necessitating Democratic support.  Because the Budget Resolution did not identify specific provisions of the ACA for repeal, the details of the legislation will not be known until the committees present their proposals. 

Budget Reconciliation: Existing Precedent

Importantly, in 2016, Congress unsuccessfully attempted to undo portions of the ACA using budget reconciliation.²  That bill, which passed both houses of Congress but was vetoed by President Obama, would have eliminated: (i) the expansion of Medicaid coverage for adults up to 133 percent of the federal poverty level, (ii) subsidies for middle-income Americans to buy insurance in the state marketplaces, (iii) tax penalties for the uninsured,³ and (iv) many of the taxes created to fund the ACA program, including the excise tax on high-cost health care known as the “Cadillac” tax.  It is possible that the repeal legislation proposed in response to the reconciliation directive will mirror the legislation proposed in 2016.  

Takeaways

The recent actions by both President Trump and Congress make it clear that they intend to focus on the promised “repeal and replacement” of the ACA early on in the Administration.   However, none of the actions taken to date has changed the current law.  We continue to believe that a full repeal of such legislation is unlikely and any changes likely will be phased in over time.  This is due in part, to the complexity of drafting an alternative that addresses the concerns of individual consumers, health care providers, and insurance companies.  The Congressional Budget Office released a report on January 17, 2017, finding that if Congress repeals the mandate penalties while retaining popular market reforms applicable to health insurers, then 18 million people could lose their insurance within a year and individual insurance premiums will increase.  The report further provides that if no replacement is enacted, 32 million people could lose their health insurance by 2026, and premiums in the individual insurance market could double.

_{¹   We note that there is speculation this date may change due to pressure from both Republicans and Democrats to have a workable replacement to the ACA prior to the repeal of any portion of the law.}

_{²   H.R. 3762, 114th Cong. (2016).}

_{³   While not a repeal of the “individual mandate” and the “employer mandate,” the bill eliminated the penalties associated with non-compliance.}