What Trump’s Affordable Care Act Executive Order Really Means

What Trump’s Affordable Care Act Executive Order Really Means

On his first day in office, President Trump released an Executive Order regarding the Affordable Care Act (ACA) late Friday, January 20, 2017. The Executive Order is more of a policy statement than an immediate, implementable change for the health care system. A closer look at the impact is examined below.

  1. The ACA was not repealed. Despite inflammatory rhetoric in the news and social media, the ACA cannot legally be repealed via executive order. While Trump directs his administration to seek repeal of the ACA in this order, repeal of standing federal law must be done via legislative action, not by executive agencies. The Senate and House have passed a budget measure to allow a process called reconciliation to begin, whereby legislation that changes spending, revenues, and the federal debt limit can be amended. The limited scope of the reconciliation process allows the legislative process to move more quickly, since it requires only a simple majority vote; however, this process is limited in its scope, and therefore the ACA cannot be repealed in its entirety without the regular bill process.
  2. Therefore, the individual mandate still requires Americans to purchase health insurance. Currently, all Americans must buy health insurance, via their employer, commercial markets, or public programs, or face an annual tax penalty. However, people who believe that the purchase of health insurance creates a hardship on them can apply for an exemption with the Department of Health and Human Services (HHS) and the Internal Revenue Service (IRS). For the time being, a formal application process, only available during particular times of the year, must be conducted in writing in order to be considered for an exemption.
  3. However, executive agencies can apply discretion to modify how the ACA is implemented to some extent. Since Trump oversees the executive agencies that implement the ACA, he and his agency leadership are able to choose how to implement those provisions. For example, HHS and the IRS could modify the process for claiming a hardship for purchasing health insurance to be easier or more lenient, perhaps by removing the requirement that the hardship documentation include either proof of recent bankruptcy filing or eviction. Administrative regulations like these can be changed, but do require a specific legal process of “notice and comment” under the Administrative Procedure Act, which the order does acknowledge. This process takes anywhere from a couple of months to a couple of years. On the other hand, Trump’s administration could decide to cease enforcing various provisions of the ACA; Trump advisors have stated publicly that Trump is considering ceasing to enforce the individual mandate tax penalty altogether. While this would likely result in significant litigation for violating a key tenant of the ACA, it is a route Trump’s administration could pursue.
  4. States are also likely to exercise more discretion. The order calls for Trump’s administration to allow states expanded autonomy to apply provisions of the ACA. States currently can apply for waivers of certain provisions of Medicaid rules and commercial insurance rules; this occurs via a demonstration project to undertake part of the ACA in a different, state-specific way. For example, Hawaii used the waiver process to eliminate the ACA’s structured Small Business Health Options Program (SHOP) on its exchange, and instead backs a state-based fund that helps small businesses offer health coverage—a system it found highly effective prior to the ACA. However, in order to utilize these waivers, states must go through a designated administrative process, including an extensive application and legal review. Again, Trump’s administration could change the regulatory process to evaluate these waivers via a notice and comment period, but will need to allow that process to unfold over a period of months or years prior to instigating these changes.

Our healthcare team at NJL will continue to closely monitor the changing landscape of health care reform and its impact to our clients. For more information on this subject and how it could impact your healthcare business, contact health care attorney Lindsay McLaughlin at 612.305.7739 or lmclaughlin@nilanjohnson.com.

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