The Trump Administration has promised sweeping policy changes that will affect millions of employers and employees. To help you prepare for these changes, we sat down with our benefits and policy experts to get their predictions on what’s coming next for benefits plans and health insurance.
The new administration has pledged to repeal the Affordable Care Act. How likely is this? What parts of the ACA will be the first to go?
We’ve seen that the new administration intends to swiftly fulfill their campaign promises. Given that President Trump has already issued an executive order aimed at starting the repeal of the ACA and that the GOP controls both the House and Senate, I estimate that a repeal is extremely likely in 2017.
The top four priorities will most likely be:
- Repeal of the Individual Mandate: Most GOP leaders, including President Trump, are not in favor of the Individual Mandate, which requires every person to have health insurance. I expect this will be one of the first items repealed, and it will likely be replaced by better tax incentives for individuals to purchase insurance, combined with increased competition for lower rates.
- Deregulation of interstate commerce: Currently under the ACA, the sale of health insurance products is regulated at the state level. Many of the GOP-led alternatives to the ACA open up the sale of health insurance across state lines, which some argue will result in more competition and greater choice for consumers—thereby leading to lower costs.
- Tax code: While it is unclear how far this will go, this is an area that the current administration will address at some level with a replacement to the ACA. The favorable tax breaks that both employers and employees experience by purchasing health insurance in the group and employer market were the result of a post-WWII tax strategy to control wages and avoid post-war hyperinflation. The end result was to allow businesses to offer health insurance to employees as a tax-deductible expense, leading to health insurance being the largest tax break in the US tax code. Clearly the GOP sees opportunity in the tax code, and I suppose this will be one of the early targets of the replacement strategy.
- Pharmaceutical companies: President Trump has recently met with leaders of pharmaceutical giants such as Merck and Pfizer to discuss how to lower the costs of prescription drugs in the USA. This is clearly another big priority for President Trump who said big pharma companies are “getting away with murder.” By addressing the cost of prescription drugs, the administration believes it can help drive down the cost of care.
What will the impact to employers and employees be?
It is important to note that while lawmakers are busy, the ACA is not definitely going away in 2017. For now, employers and brokers have to operate the same as they have been. The longer term impact is going to be determined by the ultimate replacement.
What parts of the existing ACA might survive a repeal?
While there will be change, certain components of the ACA will likely stay the same.
President Trump is emphatic that all Americans have access to affordable healthcare. Additionally, he and other GOP leaders support the current ACA feature that guarantees coverage to individuals who have pre-existing conditions. Lastly, it seems like dependent children will still be able to stay on their parents’ plans until age 26.
Any thoughts around the timeline?
This is tough to predict. The President has been very clear that the plan is to both repeal and replace the ACA. As such, the assumption would be that the timeline is largely dependent upon the GOP’s ability to agree upon a replacement. Assuming the Republicans can work together to agree on legislation, we can expect that the ACA will see some significant changes in 2017.
Are 1095/1094 reporting deadlines for this year still in effect?
Yes, 1094/1095 reporting deadlines are still in effect for the 2016 tax year filings.
President Trump has said that he wants to make it possible to “sell insurance across state lines.” What is he referring to? Will this in any way benefit employers?
Today, employers must purchase insurance in their own state. If President Trump succeeds in easing the rules around selling insurance across state lines, employers may have more insurance policy options in the future. For example, certain states limit the types of funding arrangements that can be used for employers with say, under 100 employees. If those same employers were permitted to purchase a policy under the rules of another state, they may be able to pull different strategic levers than they have been able to pull up until now.
Tom Price, the recently confirmed Secretary of Health and Human Services, has advocated for setting up tax credits for individuals to buy insurance. What are your predictions on how this would affect employers?
It’s still too early to tell, but depending on the value of the credit vs. cost of individual premiums, employers could potentially see employees dropping off their plan in favor of an individual policy that’s eligible for a tax credit.
One of Tom Price’s other proposals advocated limiting the favorable tax treatment of employer-sponsored coverage at $8,000 for an individual or $20,000 for a family. If this comes into play alongside the individual tax credit mentioned above, employer-sponsored coverage would become relatively less attractive than it has been to date.
However, an individual’s hasty decision to save money on health insurance could lead to a policy with substantially narrower networks and fewer healthcare providers.
As long as the tax-credit-eligible policies provide adequate coverage and don’t leave employees worse off, it could be a good thing for both employers and employees alike.
Has the new administration signaled any changes coming to 401(k) and IRA plans?
President Trump has delayed the "fiduciary rule,” which could have a big impact on retirement planning.
The fiduciary rule was first unveiled by the Department of Labor in 2016. The rule, which was originally set to take effect in April, makes it a legal requirement of retirement planners to put their client’s best interest first. Specifically, it requires them to:
- Ensure, to the best of their ability, that all investment advice is accurate.
- Disclose potential conflicts of interest.
- Make recommendations that are consistent with the objectives of their clients.
- Disclose all fees and commissions upfront.
Current rules hold planners to the “suitability” standard, which just requires them to meet their clients’ objectives. When it was first announced, the rule was met with strong opposition from the finance community, who argued it would cost their industry $2.4 billion.
Any thoughts or predictions around paid leave?
While President Trump has been mum on the topic post-election, he did voice support for paid leave through much of last year. His position is at odds with his Republican peers, who generally do not support a federal mandate.
While on the campaign trail, President Trump promised to institute a 6-week paid leave mandate for mothers without employer-provided paid leave. Under his plan, the leave would be paid for by unemployment insurance. It is unclear whether this would extend to same-sex marriages.
Additionally, Trump said he would allow childcare expenses to become tax-deductible through an Earned Income Tax Credit. This specifically is meant to benefit those who live below the poverty line and are estimated to spend upwards of 30% of their annual income on childcare.
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