With the failure to pass the Health Care Freedom Act (HCFA) early this morning, Leader McConnell vowed to move on from health reform to tax reform. As with healthcare, tax reform could be advanced through a reconciliation package that would only require 51 votes for passage. NAHU is very concerned about proposals that would make significant changes to the employer exclusion of health insurance, as it forms the basis of the employer-based insurance system that provides coverage to upwards of 175 million Americans. Many leading Republicans in Congress have proposed capping the exclusion, including the House Appropriations Committee, which just last week included a non-binding policy statement to implement such a cap.

The exclusion allows an employer’s contributions to an employee’s health insurance to be excluded from that employee’s compensation for income and payroll tax purposes. Proposals that modify the exclusion could push individuals from group coverage into the individual market, which would be ripe for adverse selection, leading to higher insurer losses participating in these markets. Insurers would likely offset these losses by reducing provider networks and increasing cost-sharing. Many of the inherent problems with the Cadillac/excise tax would exist for modifying the employer exclusion.

While the HCFA didn’t pass, it is likely that future proposed changes to the ACA would be pursued through regular order, which would require 60 votes for passage in the Senate, instead of 51 under reconciliation. Therefore, in addition to winning support from at least eight Democratic senators, this would also require agreement among all 52 Republicans, who to this point haven’t been able to come to an agreement on a package within their own caucus, with widespread disagreements between moderates and far-right conservatives like Senators Mike Lee (UT), Rand Paul (KY), and Ted Cruz (TX).

The list of Democratic senators who may join Republicans generally includes Senators Joe Donnelly (IN), Heidi Heitkamp (ND), Tim Kaine (VA), Angus King (I-D, ME), Joe Manchin (WV) and Mark Warner (VA). Extending that list to less likely Democrat targets includes Tom Carper (DE), Chris Coons (DE), Martin Heinrich (NM) and Claire McCaskill (MO). Additionally, winning over Patty Murray, the ranking member of the Senate Health, Education, Labor and Pensions (HELP) Committee, would be crucial for any agreement.

If any regular-order bill is able to pass the Senate, it would then need to pass the House. There are 238 Republican members of the House, of which roughly three-dozen fall in the most conservative or Freedom Caucus, and would almost certainly oppose any bipartisan efforts that wouldn’t be ideologically pure. Subtracting these members leaves a maximum of roughly 200 Republican votes that could theoretically be counted to vote in favor of a compromise package, and therefore would need 18 moderate Democrats to join them.

While the universe of moderate House members from both parties has shrunk in recent years, there are several dozen Democrats who have joined with Republicans on several ACA reform measures and would be targets for bipartisan agreement. This includes Representatives Kyrsten Sinema (AZ), Kurt Schrader (OR), Ann McLane Kuster (NH), Tony Cárdenas (CA), Scott Peters (CA), Dan Lipinski (IL), Mike Thompson (CA), Ami Bera (CA), John Carney (DE), Joe Courtney (CT), Collin Peterson (MN), and Julia Brownley (CA). Each of these Democratic representatives has supported bipartisan legislation in recent years that would make substantial changes to the ACA. NAHU has longstanding relationships with each of these members and have worked with them on legislation to change the ACA previously.

NAHU supports efforts that could potentially attract bipartisan support from legislators to help stabilize the marketplaces. We have long advocated for making piecemeal changes to the ACA that can achieve bipartisan support and therefore pass Congress and be signed into law. NAHU has been able to garner bipartisan support on a number of smaller changes to the ACA, including a delay to the Cadillac/excise Tax and Health Insurance Tax, and repeal of the small-group expansion and auto-enrollment provisions, the law’s 1099 requirement, the long-term care CLASS Act and the $2,000/4,000 deductible cap. Without a clear plan for moving a larger package to repeal and replace significant portions of the ACA, NAHU will continue to advocate for changes to the law where lawmakers can find consensus. This includes both legislative and regulatory fixes to improve the law’s impact on agents and brokers and your clients:

Legislation

• Preserve the employer exclusion of health insurance
• Permanently repeal the Cadillac/excise Tax
• Permanently eliminate the national premium tax (HIT tax)
• Fully repeal the Medical Loss Ratio (MLR) requirement 
• Allow tax credits to be used outside of the marketplace if fewer than two choices are offered in a state
• Allow any person to purchase catastrophic category coverage regardless of age or income status
• Stabilize the market: tighten both open enrollment and special enrollment periods to reduce adverse selection
• Allow states to be eligible for funding for new hybrid high-risk pools
• Increase flexibility for HSAs.

Regulation

• Limit special enrollment periods and require documentation
• Reduce 90-day grace period for individuals with premium tax credits to 30 days 
• Immediate restoration of HIPAA Certificates of Credible coverage
• Allow “grandmothered” policies beyond the scheduled expiration date of 2018
• Redefine the MLR formula to exclude broker commissions
• Allow composite rating in fully insured plans 
• Remove the requirement for standardized benefit plans to be offered in marketplaces
• Review and simplify the IRC §6055 and §6056 reporting requirements
• Remove limitations on keeping grandfathered plans
• Work with NAHU’s state chapters to pursue ACA Section 1332 Waivers to provide more flexibility to modify certain parts of the ACA.