Human Resources News & Insights

Trump issues ACA executive order: The fallout for employers

One of President Donald Trump’s first orders of business when he took office was issuing an executive order on the Affordable Care Act (ACA). Since then, much has been written about the order’s potential effect on the individual marketplace. Now, it’s time to address how it could impact employer plans. 

Here’s the bottom line: While the executive order (here’s the full text) may very well have a significant impact on employer plans down the road, it’s impact in next few months will likely be minimal.

As a result, employers still have to be prepared to comply with the ACA’s reporting requirements, for which the first deadline falls on Feb. 28, 2017.

While the Internal Revenue Service (IRS) has the discretion to delay the Obamacare reporting deadlines without going through a formal rulemaking process, it has given no indication as of yet that it would do so — despite Trump’s executive order. So employment and benefits attorneys are recommending that employers continue to prepare for the upcoming reporting deadlines.

What the order does

Trump’s executive order directs federal agencies — most notably the Department of Health and Human Services (HHS) — to exercise the authority granted 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.”

What the HHS and federal agencies will do with those orders in the short term is anyone’s guess. The executive order does not create binding law; it simply acts as a directive to federal agencies to take certain kinds of actions.

What the order does do, however, is formally declare the Trump administration’s intent to take whatever measures are necessary to dismantle the ACA. Still, undoing the majority of the law will take Congressional action.

What employers can expect next

Chances are, any changes that are spurred by the executive order will affect the individual market first. The initial thinking on Capitol Hill is that the order could result in granting more waivers and hardship exemptions from the individual mandate and/or eliminate any fees or taxes associated with the mandate.

As for its effect on employers, here’s what could happen:

  • Extension of the “good faith” standard. This is the most likely action employers can expect to result from the executive order: The IRS will issue another extension of its “good faith” standard, which says employers won’t be penalized for certain mistakes and/or delays in the reporting processes as long as they can show they tried to comply in a timely manner.
  • The “Cadillac tax” may run out of gas. The tax has already been delayed until 2020. But under the executive order, there’s a strong possibility federal agencies will stop planning to implement it at all.
  • The reinsurance program fee may disappear. Under the ACA, insurers and self-insured employers have to pay a fee per every life their plans cover. For 2016, that fee was $26. The money was to be pooled in an account managed by the HHS, and it would be used to reimburse insurance companies who end up covering a large share of individuals with pre-existing conditions. There’s a possibility the second installment of that fee — due in November — may get axed. Insurers, naturally, were expected to pass these fees on to their customers — i.e., employers.
  • The Patient-Centered Outcomes Research Trust Fund Fee could be finished. Insurers and self-insured employers were expected to cut the IRS a check for every life they covered. The fee was roughly $2 per life and was to be used for research conducted on the clinical effectiveness of medical treatments, procedures and drugs. Many analysts now feel the collection of this fee will be suspended.

Stay tuned. We’ll keep you posted as federal agencies like the HHS, IRS and Department of Labor respond to the executive order. But it may take some time, as Trump’s cabinet picks — specifically his HHS secretary — haven’t been confirmed yet.

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