Repeal or Repair?

Health reform is more likely to get a nip and a tuck rather than a toe tag.

In the wake of midterm victories, triumphant Republicans have repeatedly vowed to repeal health-care reform. Yet political reality suggests that GOP leaders’ only real option will be to fix and polish the very law they would prefer to consign to the dust heap.

That may be good news for companies, particularly larger ones, that are less concerned with repealing the law than with untangling its thicket of contradictory provisions. “The cost of compliance for this has been enormous,” says Chantel Sheaks, head of government affairs at Buck Consultants. “The CFOs who write checks to the lawyers and consultants are seeing that.”

Although most of the law’s major provisions don’t kick in until 2014 or later, nearly half of 2,800 employers surveyed by Mercer said their per-employee health-care cost this year had risen between 1% and 5% due solely to complying with the law’s requirements (see chart, below).

While many small employers are still pushing for repeal, adds Geoff Manville, head of Mercer’s government-relations team, most “large employers are focused on negotiating the nitty-gritty details” with regulators.

Indeed, repealing the Patient Protection and Affordable Care Act (PPACA) will be all but impossible for the next two years, as Republican senator Mitch McConnell (R–Ky.) admitted in November. “We can — and should — propose and vote on straight repeal, repeatedly. But we can’t expect the President to sign it.” Instead, he said, Senate Republicans will have to tackle the “most egregious” provisions.

Yet the aspects truly despised by conservatives, notably the mandate that all citizens buy health insurance, are also protected by threat of Presidential veto. “Polling data suggests [the individual mandate] is unpopular,” says Manville, “but it is really the glue that holds the law together, and the insurance industry desperately needs it to make the law work.” That means any changes are most likely to come from making technical corrections and chipping away at smaller provisions.

 Estimated increase in per-employee health-care costs in 2011 due to PPACA compliance

Despite the politically charged atmosphere, both parties have strong reason to be seen as working toward fixes. Pushed through Congress without the usual conference-committee cleanup session, the law is filled with inconsistencies. For example, starting in 2014, all plans must have an out-of-pocket maximum. But the way this figure is calculated under the law may cause some high-deductible plans to become incompatible with health savings accounts, even though the two are supposed to work in tandem. Likewise, companies can ignore seasonal employees when calculating whether they meet the 50-employee limit that requires them to provide health care. But if the company does meet the limit, those same uncounted workers may result in company penalties if they buy health care on an exchange.

Small companies may be the first to benefit from a bipartisan fix. At press time, both parties and the President were making favorable noises about rolling back the requirement that companies report all vendor payments of more than $600 a year to the Internal Revenue Service. The rule, intended to help the government capture untaxed transactions, is widely viewed as creating a paperwork nightmare, particularly for small companies.

Such changes may help the law become more palatable to businesses, many of which must decide in 2014 whether to continue to provide employee health coverage or accept a penalty. Of course, if Republicans succeed in fixing aspects of the law that companies don’t like, they may inadvertently help it to survive.

“I think of the law as a baby in the neonatal ward,” says Manville. “The first few months are critical, but if it gets through that stage, maybe it can grow and thrive.”

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