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Four possible scenarios for PPACA after the election

Election day is finally here, and many of our clients, colleagues, and others are asking us, what impact will the election have on health care reform. Along with our clients, we have lived with the positives and negatives of both Massachusetts and the beginning stages of Federal Healthcare Reform since 2007. Long after the election of November 6 2012 is settled, many questions will remain, regardless of the political outcome.

#1:Romney and Republican Victory
Romney wins the election and the Republicans take over the Senate with at least 60 seats. They hold onto the House of Representatives. Romney upholds his campaign promise to sign an executive order to allow the states to obtain waivers from PPACA, but does that end things immediately. History has shown that newly sworn in Presidents  have a difficult time quickly overcoming their predecessors work, especially large pieces of legislation that both Congress and the Supreme Court have rendered judgment on. In our mind, the bigger question will be can the new administration and the 113th Congress accomplish their repeal goals, let alone their promises to “replace”, in time to limit or nullify the impact on employers that PPACA places on them in 2014? We believe that the short answer is “maybe.”

Romney has publicly stated that he likes several provisions of the law, so his administration will more likely separate the insurance carrier provisions that protect members, from the more crushing mandates on employers. Several of the provisions of PPACA already in place, such as coverage of children to age 26, are popular for people who have benefited from the law. There is the possibility of a total repeal, but a lot would need to line up just right for Romney and the Republicans, especially before the end of the Congressional session in the Fall of 2013. For employers hoping for a total repeal of the law, this scenario would be most favorable for them, but this scenario seems a lower likelihood than the next two.

#2: Romney Victory But Status Quo in Congress
Romney wins a close election, but the Democrats maintain a less than 60 seat majority in the Senate. The Republicans currently have a 50 seat majority in the House, and maintain a majority. PPACA is the “law of the land”, so repeal would involve a literal act of Congress. In this scenario, the big question to us seems to be would any Democrats in the Senate support repeal, and that possibility exists if members of the Senate read the prevailing mood and judge that they should cross party lines.

However, more likely might be executive directions to delay implementation of key aspects of PPACA, and it would be interesting to see what happens. Many of us have anxiously awaited regulatory guidance on the provisions impacting employers in 2014. It seems that the Department of Health and Human Services, Labor and Internal Revenue Service (the 3 key agencies releasing guidance on PPACA) have slowed the release of information; have they been waiting to see how the election plays out? Maybe. In this situation, where repeal is difficult, we may see foot-dragging. We have already seen a number of provisions delayed (non-discrimination for insured plans, W-2 reporting, etc.). Then, what happens in 2014 when there is another mid-term election? Recent history has not been kind to the current administration, so one could argue that Romney has a 2 year window to accomplish many of his goals, including repealing the Act.

We think this scenario is relatively likely, as is…

#3: Obama Victory But Status Quo in Congress
The President is reelected. If re-elected, we believe that the regulatory machine will come back to life and we will see a lot over the next 14 months impacting employers. In this scenario, the House will continue its futile efforts at repeal, which will be blocked by a Democratic majority in the Senate. The interesting action will take place at the state level, where a variety of responses to both exchanges and Medicaid expansion will happen.

For a multi-state employer thinking about changing how it approaches health insurance, this new environment may prove tricky as everyone tries to understand a rapidly changing landscape of state-based efforts. In addition, Congress may continue to hit on budgeting for the implementation of PPACA, and given the seriousness of several financial matters before Congress, the second Obama administration may be forced to pick its battles and funding for certain provisions of PPACA may lose out.

The challenging thing for our clients in this scenario will be the somewhat chaotic process that may occur as the regulatory agencies try to implement the law but are hindered by certain parts of Congress. It may make for confusing and/or conflicting information or further delays. Certain aspects of the law, such as the reduction in Medicare reimbursements, that have the possible unintended consequence of benefiting employers for whom reimbursements to providers are based on a percentage of Medicare payments – they still may not happen. However, in this scenario, PPACA will become more entrenched and more difficult to repeal for whoever wins in 2016.

We think that this scenario is just as relatively likely as #2 above, given the closeness of the race.

#4: Obama Victory and Democrats Take Control of the House

As with #1 above, we think this is less likely than #2 or 3, however in this scenario, it would lead to a full-implementation of the Act. Regulatory agencies and the administration would see this 2-year window as the time to implement the law, entrenching it in society. The similarities would be to early efforts to repeal Medicare and Medicaid in the 60’s. Once LBJ was reelected, it became impossible to repeal it; too many people benefited and that window had closed.

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William Gallagher Associates is a leading provider of insurance brokerage, risk management and employee benefits services to firms with complex risks and dynamic needs, within industries that include technology, life sciences, financial risks, health care, renewable energy & clean technology, and environmental services. WGA has offices in Boston, MA; New York, NY; Hartford, CT; Princeton, NJ; Columbia, MD; and Atlanta, GA.

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