Government reopening reignites health policy debate 

The longest-ever government shutdown is now over thanks to the bipartisan agreement signed into law last week that funds most of the government through January 30 next year. The stopgap spending measure also extends some healthcare policies not squarely in the employer plan space — including telehealth flexibilities in Medicare that expired in October.

Most relevant to employer health plans is the promise of Senate Republicans to Democrats to hold a vote in December on whether/how to extend the enhanced Affordable Care Act subsidies enacted during the COVID pandemic that are now set to expire at the end of the year. That agreement sets up a high-stakes policy debate that could pull in reforms with direct implications for employer plans.

While Senate Democrats had insisted that an extension of the subsidies be included in the new stopgap spending bill as a condition for providing the votes to needed to reopen the government, a group of moderate Senate Democrats bucked party leaders to strike a deal with Republicans to end the shutdown. That deal has most Democrats in both chambers fuming, but Senate Democrats now need to quickly draft a bill that achieves their goal — and the goal of more than a few moderate Republicans in both chambers — of extending the enhanced ACA subsidies in some form.

That bill will also need at least 60 votes in the Senate. Can Democrats craft something that satisfies their side and that also gets support from at least 13 Republicans, not to mention support from House Republicans and President Trump? The answer is almost certainly not without major changes to the subsidies, such as reinstating income caps for eligibility and/or extending them for only a year or two.

Lawmakers in both parties are exploring a compromise, but current proposals seem to be trending in opposite directions and don’t necessarily correlate with party affiliation. Many favor temporarily extending the current subsidies in some form, while another idea supported by key Republicans, including President Trump, would create an entirely new structure that would put ACA subsidy amounts otherwise payable directly to insurers into individuals’ Flexible Savings Accounts or Health Savings Accounts.

The substance and timing of legislation to create that new structure — Senate Republicans have talked about HSAs and FSAs interchangeably — and whether it would be linked to the promised Senate vote on subsidies remains to be seen. Some Republicans are envisioning a parallel process that results in separate votes on a Democrat-authored bill to extend the subsidies and a Republican measure proposing the individual account idea and potentially other ACA reforms.

A compromise between the parties on some type of ACA subsidy extension is possible given the end-of-year deadline and bipartisan concern over potential premium increases. But if Congress allows the expanded subsidies to expire or substantially pares them back, there are possible implications for employer plans.

Those plans, for example, might see higher enrollment if they look a lot more valuable to current and potential employees compared to the ACA marketplace. And with millions of Americans projected to lose coverage without the expanded subsidies, providers may try to charge employer plans more to make up for lost revenue.

Another key issue for employers to watch in this debate is whether any congressional deal on ACA subsidies that might happen this year, or in time to ride on the government spending bill needed by the end of January, might carry any employer-backed policies nearly enacted in December 2024. These include bipartisan proposals to ensure greater transparency in the healthcare system, expand site-neutral payment reforms that align payment rates for services across sites where patients receive outpatient care and restrict anti-competitive contracting provisions that limit plan sponsors’ flexibility to design high-value plans.

Republican proposals to enhance HSAs, such as allowing employees to receive low- or no-cost care from an employer onsite clinic without jeopardizing their HSA eligibility, may also be part of negotiations on a potential package that could clear a backlog of bipartisan healthcare reforms.

Mercer continues to support employer efforts urging Congress to take prompt and decisive action to enact the bipartisan policies outlined above, but the path forward is uncertain.