This ACA Brief is the first in a series of installments that will closely track congressional and administrative actions relating to ACA provisions that impact large employer-sponsored plans. 

On January 12, the U.S. Senate passed S. Con. Res. 3 (the Resolution), a concurrent budget reconciliation resolution which is expected to be the legislative vehicle for repealing certain key provisions of the Patient Protection and Affordable Care Act (ACA). The U.S. House of Representatives followed suit by passing the Resolution on January 13. 

The Resolution does not explicitly repeal—or even mention—the ACA. Instead, the Resolution contains instructions to two Senate Committees (Senate Finance and Senate Health, Education, Labor and Pensions) and two House Committees (House Ways and Means and House Energy and Commerce) to draft legislation that would reduce the deficit “by not less than $1,000,000,000” and to reconcile such legislation among the respective committees no later than January 27, 2017. It is expected that the final legislation will include provisions repealing portions of the ACA. Specific repeal language will be fleshed out in a process that will be linked to the passage of the fiscal year 2017 budget. 

Congress has chosen to effect ACA repeal through the reconciliation process for a simple reason. Under the Congressional Budget Act of 1974 (the Budget Act), budget resolutions are immune to filibuster by opponents in the Senate, and need only a majority of votes in the U.S. House of Representatives to pass. Accordingly, the legislation moved swiftly through both chambers last week. Similarly, the House and Senate reconciliation bills that will contain actual repeal provisions will also be protected by a similar set of voting rules. This type of legislation can be considered by Congress using expedited legislative procedures that will prohibit a filibuster, require only a simple majority for passage (i.e., no Democratic votes) and restrict amendments in the Senate. 

However, the reconciliation process is subject to the complex Budget Act rules, which will significantly curtail this stage of the repeal process. The Budget Act includes language known as the Byrd Rule, which allows any senator to block provisions of a reconciliation bill that are considered extraneous, or not directly related to budget spending. Under the Byrd Rule, generally, any ACA repeal language in a final budget reconciliation bill may be considered extraneous if the provision: 

• Does not produce a change in outlays or revenues;
• Produces a change in outlays or revenues, but that change is “merely incidental” to the provision’s non-budgetary effects; or 
• Increases the federal deficit going forward without an offset.¹

If any senator believes that one or more ACA repeal provisions do not meet this criteria, the senator may raise a “point of order” against the provision. If the Senate Parliamentarian makes a final determination that the provision is extraneous, the point of order will be sustained, and the language will be deleted from the legislation. Sixty votes are required to override the Parliamentarian’s ruling in the Senate. 

What does this mean for large employer-sponsored plans? 

The Budget Act rules mean that while the ACA’s revenue provisions, including the penalties associated with the employer mandate, are ripe for repeal during the reconciliation process, many of the insurance market reforms are not. Certain key ACA provisions are therefore unlikely to be included in this round of repeal because they do not involve a change to outlays or revenue, and thus would be unlikely to survive a Byrd Rule challenge. For instance, provisions, such as mandatory “first dollar” preventive care, restrictions on annual and lifetime limits on essential health benefits, and mandatory coverage for children up to age 27, are unlikely to be included in budget reconciliation legislation. The process (and timing) for repealing these non-budgetary provisions is still unclear. It is also unclear whether ACA replacement language will be made part of the reconciliation process. 

What’s next?

On or before January 27, the respective committees should report their recommended ACA repeal provisions as part of a budget reconciliation bill pursuant to the instructions contained in the Resolution. At that point, more will be known about the ACA revenue provisions that Congress will attempt to eliminate or amend during this first stage of repeal. After the recommended changes are reported, the provisions will be made part of budget legislation that will be voted on by the House and the Senate. The legislation will need only a majority of votes to pass in the Senate, rather than the usual 60 votes necessary to avoid a filibuster. Upon passage, the legislation will be forwarded to the President for signature.
                                

¹ There are certain other prongs to the test for extraneous provisions, but these are most relevant for purposes of the ACA repeal legislation. In addition, it is important to note that Sen. Con. Res. 3 establishes a deficit-neutral reserve fund for health care legislation, and a reserve fund for health care legislation. These reserve funds will allow the budget committees to be more flexible in applying certain budget enforcement rules to any repeal legislation, reducing the possibility that the legislation will be subject to budget and deficit-related objections by opponents.