Devising a way to “repeal and replace” the Affordable Care Act (ACA) will be the top healthcare priority for President Trump and the Republican-controlled Congress next year. Every health sector, including the health insurance industry, is scrambling to understand the implications and impact.

To prepare, insurers must monitor, track and analyze all ACA-related policy proposals from President-elect Trump’s transition team and the Congress. Insurers should proactively evaluate and consider responding aggressively with alternative policy proposals as necessary. Perhaps most important, insurers should consider establishing relationships with members of Congress and incoming Administration officials at the Department of Health and Human Services (HHS) and the White House, with immediate focus on transition health team members who often move into influential Administration roles.

Key questions and preliminary considerations for the health insurance industry include these:

Can the ACA be fully or partially repealed?

To fully or partially repeal the ACA, both the House of Representatives and the Senate must approve legislation. However, the minority party could block such legislation in the Senate through filibuster, which requires 60 votes to overcome. Republicans are expected to have only 52 Senators next year, so congressional leaders have signaled that they may opt to use the budget reconciliation process to undo the ACA’s critical budgetary provisions. Reconciliation is an expedited process that allows the Senate to consider certain tax, spending and debt legislation with limited amendments. Filibusters are not allowed, and passing a reconciliation bill requires only 51 votes.

What specific ACA provisions could the Congress eliminate?

Last year, Congress passed such a reconciliation bill (which President Obama vetoed), HR 3762 “To provide for reconciliation pursuant to section 2002 of the concurrent resolution on the budget for fiscal year 2016,” targeting most (if not all) of the budgetary provisions under the ACA.

This bill eliminated the premium subsidies to help certain individuals afford health plans through the ACA-created Marketplaces. These subsidies are provided to approximately 85 percent of enrollees in Marketplace plans. The bill rescinded the Medicaid expansion programs and the individual and employer mandates. Most of the taxes used to fund the ACA, including the medical device and branded drug tax, were dropped as well. The following provisions from HR 3672 should be of particular interest to health insurers:

  • Sec. 104: HHS may not collect fees or make payments under the transitional reinsurance program.
  • Sec. 209: The excise tax on high-cost employer-sponsored health coverage (popularly known as the “Cadillac tax”) does not apply after 2017.
  • Sec. 215: The annual fee on health insurers is eliminated.
  • Sec. 221: A health insurer is allowed a tax deduction for the full amount of an employee's compensation.

What would be the timing for full or partial repeal of the ACA?

Getting to budget reconciliation legislation will not happen overnight. Congress must approve a budget resolution before consideration of a reconciliation bill may even begin. However, a newly inaugurated President Trump need not wait for the Congress to act — he could issue executive orders and propose regulations designed to repeal or significantly change certain sections of the law in the early days of his Administration. That said, the president-elect has begun already to soften his campaign statements, calling only for a full repeal of the ACA on his first day in office. In a recent 60 Minutes interview, Trump stated that there will not be “a two-day period” or “a two-year period where there’s nothing. It will be repealed and replaced.”

Given the extraordinary and negative impact on the 20 million Americans currently covered by the ACA, as well as insurers, hospitals, providers and industry, attempting only to repeal and not replace the ACA would be politically dangerous. The Administration and Republicans in Congress will seek to develop a more attractive package that would include both “repeal and replace” policies.

What might replace the ACA?

The Trump platform did not provide a detailed health plan, although it did include a “portability” proposal allowing the purchase of insurance plans across state lines. In addition, President-elect Trump recently indicated that two ACA provisions would not be repealed: allowing adult children to remain on their parents’ health plans until age 26 and prohibiting insurance companies from denying coverage to those with preexisting conditions. This latter provision could be challenging to maintain without an individual mandate for health insurance as younger and healthier individuals are needed to “balance out” older and sicker individuals in an insurance pool; otherwise, the costs and premiums will become exorbitant and unsustainable for patients and plans in the long-term.

President-elect Trump is expected to release more details on his healthcare proposals in the near future, although, he may defer to Congress to develop a repeal and replace package. In this case, many believe that House Speaker Paul Ryan of Wisconsin’s health proposals, as outlined in “A Better Way — Our Vision for a Confident Americaand the Patients’ Choice Act, will serve as the foundation for a congressional proposal.

The Ryan plan includes the following relevant provisions for health plans:

  • expanding health savings accounts and using health reimbursement accounts
  • allowing purchase of plans licensed in other states
  • encouraging creation of small business health plans (association health plans)
  • offering healthcare coverage at lower cost to employees participating in a weight-loss or smoking-cessation program
  • allowing employers who self-insure to purchase stop-loss insurance to cover large medical claims

Additionally, the Ryan plan would eliminate individual state Medicaid expansion programs, instead creating state block grants for Medicaid, as well as capping the employee tax exclusion for employer-provided health coverage.

What is the Trump transition team doing now?

President-elect Trump’s core transition team, led by Vice President-elect Mike Pence, is beginning to vet new appointees, review agency action and work with the Congress to develop policy proposals for early implementation by the new Administration.

The team has a number of health advisers, including Andrew Bremberg, who will serve as head of the healthcare transition. Bremberg served at HHS under President George W. Bush and more recently as an adviser to Senate Majority Leader Mitch McConnell of Kentucky and the presidential campaigns of Wisconsin Gov. Scott Walker and former Massachusetts Gov. Mitt Romney. In these roles, he led the drafting of policy proposals to repeal the ACA.

A number of individuals are rumored to be candidates for HHS secretarial appointments. Two have familiarity with health care financing: Florida Gov. Rick Scott, the former CEO of Columbia/HCA, the for-profit operator of health care facilities based in Nashville and former HHS Assistant Secretary and former Louisiana Gov. Bobby Jindal, who once served as head of the Louisiana Department of Health and Hospitals. Other serious contenders include former GOP presidential candidate and pediatric neurosurgeon Dr. Ben Carson and former House Speaker Newt Gingrich.

Will there be changes in congressional health leadership in 2017?

Transition in health leadership in the Congress is occurring on a parallel track. Speaker Ryan may be challenged but is expected to maintain his position in the 115th Congress. However, there will be changes on several key health committees:

  • Energy and Commerce Committee Chair Fred Upton of Wisconsin has met his term limit, and Reps John Shimkus of Illinois and Greg Walden of Oregon are considered the leading contenders to take his place.
  • Energy and Commerce Health Subcommittee Chair Joseph Pitts of Pennsylvania is retiring, and the expected replacement is Dr. Michael Burgess of Texas. Other interested members include Dr. Tim Murphy of Pennsylvania and Rep. Marsha Blackburn of Tennessee, a member of the Trump transition team.
  • Ways and Means Health Subcommittee ranking Democrat Jim McDermott of Washington is retiring as well. Either Democratic Caucus Chair Xavier Becerra of California or Rep. Bill Pascrell of New Jersey may serve as his successor.