Frustrated with stalled efforts in Congress to repeal Obamacare, President Trump moved forward this week with executive orders aimed at shaking up the existing system, including one to end billions of dollars in payments to insurers to subsidize low-income consumers. Many fear this will destabilize America’s insurance markets, and Democrats and Republicans continue to negotiate a way forward that avoids the worst.
So what does all this mean for business, and how should CEOs interpret the latest news? To make sense of it all, I talked with Avik Roy, President of the Foundation for Research on Equal Opportunity, and one of the country’s foremost experts on healthcare policy.
His takeaways: No immediate impact from any of the executive orders, but there are a few potential upsides that employers should watch closely. As for planning, CEOs should look to history. Despite the promises, Republicans in congress and the president are likely to get little of their agenda accomplished.
Chief Executive: So in your mind, what’s the impact of today’s decision by the Trump administration on business? What should CEOs know about what’s in the works?
Avik Roy: The short answer is that the impact of today’s news about this cost-sharing subsidies is minimal for most companies. Typically speaking, employers are not interacting with the Obamacare exchanges. They’re offering coverage that they’re sponsoring through the employer tax exclusions…in which workers don’t pay any income or payroll taxes on the value of the insurance that their employer provides. So the short answer is not much effect for employers, based on the actions of today.
The one way it could impact employers is to the degree that if the doomsayers are right— there are a lot of people who are commenting today that this will totally destabilize the market and that the markets will degrade as a result of this action. I don’t believe that to be the case, I think the markets have already degraded a lot and I don’t see this as materially impacting them more than they already were degrading.
But to the degree that it does, if that were to happen, if there were to be more destabilization as a result of this action, then that’s going to increase the demand for employer-based insurance, right? Because if the individual markets aren’t working, to the degree that people feel that they need to take a job to get good health care coverage, then that’s going to be kind of an upside for recruitment and retention of employees.
Paradoxically, that’s the opposite of what economists want. What economists want is to equalize the treatment of health insurance for employers and individuals so that you have more flexibility in going freelance or taking a new job.
But if the individual market continues to degrade, that actually benefits employers in their ability to offer products that are attractive to workers.
CE: What do you think the actions of the last two days says about where the ongoing debate over ACA/Obamacare is going?
Avik Roy: It’s an indication that the White House is frustrated that congress has taken no action to repeal and replace Obamacare. I think the administration had prepared these ideas for quite a long time and held off on signing them because they were hopeful that congress would have legislation that would be an overhaul of the law.
But that hasn’t happened, obviously, and the prospect of that happening continues to be relatively low. And so I think at this point he White House said “we’ve waited long enough for congress, now we’re gonna have to act so that we can at least tell our voters that we’re doing our best to deliver our promise.”
CE: So if you’re an employer right now, what should you be doing? Obviously you’ve got to be thinking months if not a couple years down the road about the overall trajectory of this.
Avik Roy: I think the safe bet in any environment is to assume that congress does nothing. It’s very hard to pass bills.
Usually what I’ve seen is that there’s a new president or there’s a president reelected and businesses start to make decisions in thinking, “okay, here’s so-and-so and they’re elected and he says this is his agenda and we just have to assume that this agenda will all get enacted.” And that rarely happens. Rarely does a president get his agenda enacted in full. Maybe parts of it get enacted but never all of it. Maybe LBJ would be the exception just because he was a master legislator and he was able to get a lot of things done. But generally speaking, that’s not how it works.
So I think in general, people should assume that nothing happens and obviously we’ve got this tax reform debate coming up. That’s going to be the key thing to watch in the next couple of months.
I think in terms of health care policy, the most interesting thing that’s happened from an employer standpoint was the executive order yesterday to liberalize the way in which employers can use health reimbursement accounts to offer health care subsidies or assistance to their workers.
Health reimbursement accounts are basically employer versions of health savings accounts, money that workers can use to spend on their out-of-pocket expenses, pay their deductible and things like that. And…the Trump administration wants to liberalize the use of health reimbursement accounts so they can be used for a lot of different things.
If what comes out of that is significant policy change, that could be an opportunity for employers to put workers and patients more in charge of their own care dollars in a way that will create fiscal certainty for companies that are saying, “okay, my health care costs are going up 6% a year, but one way to address that is to say, you know, we’re going to give kind of a defined contribution, a fixed dollar amount in the form of a reimbursement account to my workers to then spend that on the health care coverage they want and need.”
That may be a really interesting opportunity down the road. But it’s going to depend on the details of what the administration does, and we don’t know yet what those details will be based on the executive orders.
CE: So for now more of the same: Wait and see.
Avik Roy: Right.