Repealing Obamacare Is Easier Said Than Done

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Donald Trump promised that repealing Obamacare would be his first act in office, and the recent Republican sweep of all three branches of federal government seemed to indicate that full repeal would happen.  But then Trump met with Obama at the White House and suddenly announced his intent to keep some of Obamacare’s more popular provisions — namely barring insurers from turning away those with pre-existing conditions, and allowing those up to age 26 to remain on their parents’ insurance.  The President-Elect’s speech was almost immediately softer than it was on the campaign trail.  Still, Trump’s softening to a few provisions of Obamacare won’t save it.  Republicans have been vowing to dismantle it from day 1, and the majority they now hold likely seals the deal. Obamacare is on the rocks.  All we can do now is wonder how it will be “repealed”, and what, if anything, will take its place.

Taking Down a Giant

The GOP basically has three options: 1) Work with moderate Democrats to simultaneously abolish and replace Obamacare; 2) Eliminate the filibuster so Democrats can’t stop Republicans from all-out repeal of Obamacare; or 3) Use the Senate’s budget reconciliation process to repeal most of Obamacare’s big pieces with just 51 votes, and promise to come up with a replacement later.  Given the complexity of crafting a bipartisan bill (required for the first option), or changing long-standing policy regarding filibuster (required for the second), option three seems most plausible.  

(Congressional Republicans actually used the reconciliation procedure early this year to pass a bill that would have repealed most of the Affordable Care Act’s important sections. President Obama vetoed it, of course, but the text is still out there.  Republicans could feasibly update it and take it to President Trump for signature.)

Why It’s Tricky

Reconciliation avoids a Senate filibuster and could allow Republicans to pass changes on a party-line vote. The problem is, they cannot repeal all of Obamacare this way.  Reconciliation can only be used on matters that affect the budget, which typically means tax and spending legislation, not regulatory changes.  So Congress could use reconciliation to stop Washington from operating the health-care exchanges, to cut the ACA’s insurance subsidies, to eliminate the tax penalties for not complying with the individual mandate, and to reverse the Medicaid expansion, among other financial changes, but doing so would leave a whole host of regulations just sitting out there, including the ones forcing insurers to cover consumers with pre-existing conditions (which Trump now says he supports).  

In all likelihood, the Senate will propose and pass bills that phase out Obamacare over the next few years.  That’s because obliterating Obamacare’s spending but maintaining its numerous regulations would all but destroy the individual insurance market. Sick patients seeking coverage would drastically increase costs for carriers, making premiums unaffordable for many Americans.  Politicians know this, and turning healthcare into an unfunded mandate is the last thing any would want to do.

And Trickier Still

Republicans are in agreement that Obamacare needs to go, but they don’t have an agreed upon replacement plan.  Even House Speaker Paul Ryan’s proposal — which would largely fund itself by limiting the tax break for employer-provided insurance —  is massively unpopular, mainly because it looks a lot like Obamacare’s Cadillac tax on deluxe health plans, a provision even Bernie Sanders and Hillary Clinton vowed to kill.  Other Republican replacement plans involve providing tax credits to low-income families so they can buy private coverage, but that all looks a little too “Obamacare-ish” to hardline conservatives in the House to fly.  And not too many lawmakers are willing to do away with the entire Medicaid expansion, or the popular protection for patients with pre-existing conditions.  Conservatives indeed have their work cut out for them.  

If and when a replacement plan is agreed upon, Republicans will need 60 supporting votes to overcome a filibuster.  The GOP doesn’t hold the supermajority in the Senate needed to do that (they currently have 51 seats), so they’ll need some Democratic support.  For these reasons, the process of “replacing” the Affordable Care Act with a GOP alternative could last many months, and possibly years.

What It Means for Small Business

It’s all really, really uncertain.

A few months ago, I outlined 5 simple things every small business owner could do to effectively close out 2016 and prepare for 2017.  I still recommend taking those steps.  Unless Trump shocks us all (and granted, he’s been known to do it), a full repeal of Obamacare isn’t coming, and the process of unraveling it and rebuilding an agreed-upon national healthcare policy will be a long and grueling process.  Obamacare may be up against the ropes, but we’ll have to follow its mandates for awhile.

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