When a Republican Runs Obamacare

Published April 8, 2014


Though it is admittedly hard to imagine at the moment, a Republican could actually win the White House again someday.

That thought raises an interesting question: what would happen to Obamacare under such a scenario, remote as it might seem?

Democrats are hoping that by the time such an unpleasant turn of political events rolls around Obamacare will be solidly entrenched as an important component of the health system. The hope is that the public will have become accustomed to the law’s rules and subsidies, and that a growing number of people will actually be favorably disposed to the program because of their personal experiences with subsidized coverage. Growing acceptance of Obamacare is certainly plausible given the history of citizen acceptance of significant government involvement in the health systems of other economically advanced democracies. At a minimum, Democrats are banking that tens of millions of people, especially those getting insurance through the exchanges, will believe the continued security of their health coverage is dependent on the continuation of Obamacare.

Republicans, meanwhile, hope that the election of a GOP President would set in motion a full legislative solution—repeal and replacement of the law with a market-based alternative plan.

But what if a Republican gets control over the levers of Obamacare administration without also getting a clear path to a legislative solution (for instance, if the Senate remains under Democratic control or Republican control is sufficiently narrow or politically fragmented to slow the adoption of an alternative plan)?

If that were to happen, the decisions by President Obama over the past months and years to assert executive discretion over the interpretation of major sections of the law could come back to haunt the law’s supporters. Because of the precedents that have been set, it will be very difficult to complain if a Republican president were to use the same supposed executive authority to push the implementation of the law in a very different direction.

For instance, the administration has released a long list of conditions that satisfy the “hardship” exemption from the individual mandate tax. Among other things, a person may self-certify that he or she cannot pay the tax because of expenses associated with caring for an “ill, disabled, or aging family member.” It is not hard to imagine a Republican administration expanding the Obama administration’s list substantially, to the point where the mandate really does become meaningless, if it hasn’t already reached that point.

Similarly, the Obama administration has effectively gutted the employer mandate through 2015. The mandate is not being enforced this year, and the administration took the bite out of it for 2015 too by raising the employment threshold for exempted businesses from 50 to 100 workers. For those firms with at least 100 workers, they can comply by providing coverage to just 70 percent of their workers (most employers with over 100 workers already do so). A Republican administration could build on these legally-dubious “transition provisions” and assert that special rules are needed for several more years to prevent undue disruption of the labor market.

Further, in the on-going backpedal over the “you can keep the health plan you like” flap, the Obama administration has said it will not enforce insurance rules, for a period of at least three years, which would otherwise force the cancelation of millions of policies. This supposed “fix” fell far short of a real solution because many state insurance regulators chose not to allow the old plans to be reopened. Moreover, some insurers have not moved to reopen the plans they canceled in 2013. A Republican president could take all of this a significant step further by: announcing the intention to allow the old plans to continue in existence on a permanent basis; by loosening the rules around what constitutes a canceled plan that can be reopened; and by allowing new entrants into the old insurance plans as well. He could also clarify that anyone in these old plans would be permanently exempt from the individual mandate tax as well. These changes would create a large escape hatch from Obamacare.

The Obama administration has also sent signals that it will work with health insurance industryto make the taxpayer-financed cushions against insurance losses in the exchanges as generous as possible. Administration officials hope to coax insurers into low-balling their premium requirements for 2015, and beyond. A new, Republican administration could easily take the opposite approach and tighten the rules wherever possible. One key provision—the risk corridor provision, which explicitly limits insurer losses—is expected to expire after 2016, but there is a broad expectation that the administration will do whatever is necessary to extend the concept through an indirect route. A Republican president could reverse direction and force insurers to price their products without the expectation of a taxpayer backstop if they lose money.

A Republican administration is very likely to quickly reverse course on the so-called “HHS mandate.” This is the regulatory requirement (not in the statute) which is forcing employers, including those with strong religious objections, to pay for products and services they find objectionable. Among other things, the regulation is forcing Catholic universities to include in their health plans for their workers all manner of contraceptive products and services, including those which can induce an early pregnancy abortion. If not struck down by the Supreme Court or lower courts, there will be enormous pressure on a Republican president to quickly dispense with the requirement altogether or, at a minimum, to carve out a generous exemption for employers with sincere religious objections to it.

The Obama administration’s creative use of executive discretion has extended beyond insurance rules and the exchanges too. In Medicare, for instance, the administration advanced a demonstration program in Medicare that paid Medicare Advantage (MA) plans an extra $5.3 billion above what was provided under the law. Most of the spending occurred before the November 2012 election and masked the cuts that Obamacare had made in the MA program up to that point in time. This was the first time that the Office of Management and Budget had allowed such a sizeable Medicare demonstration to go forward that wasn’t budget neutral. What would stop a Republican administration from using this precedent to push billions of dollars more into the MA program and effectively undo the MA cuts in Obamacare on a permanent basis?

The most significant reinterpretation available to a Republican president would be to reverse the decision allowing premium credits to be paid by the federal fallback exchange. This is, of course, the subject of a pending lawsuit, with the plaintiffs arguing that the law is clear and only state exchanges are authorized to pay the credits. The Obama administration is relying on long-standing precedents to argue that the executive branch can make interpretations of this kind when there is ambiguity. If the courts side with the Obama administration, it would not preclude a new set of lawyers, under a new administration, from reaching the opposite conclusion about how to read the statute.

A reversal of this kind would be politically tumultuous, to put it mildly. By the time a Republican president has a chance to make such a decision, there could easily be ten million or more people getting premium credits from the federal exchange. It is hard to imagine a Republican president terminating these credits without first lining up a replacement program more to his liking. Nonetheless, the option would be there, and with it also the leverage to push Congress to enact an alternative plan.

The wide latitude available to a Republican president to reinterpret Obamacare does not mean it would be wise to take all of these steps, or any of them for that matter. The goal would need to be movement of the nation’s health system toward one which would provide secure insurance and stable costs for everyone—without the baggage of Obamacare. How a Republican president should proceed on these, and many other matters subject to interpretation, would depend on the overall plan to replace Obamacare with something far better.

For the moment, though, it is sufficient just to note that the current president has opened the door very wide to reinterpreting Obamacare after he leaves office. And creative use of that opening by a future president could lead to some surprising long-term changes in the nation’s health system.

James C. Capretta is a senior fellow at the Ethics and Public Policy Center and a visiting fellow at the American Enterprise Institute.

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