Background

Since the enactment of Medicare and Medicaid in 1965, the most substantial health care reform implemented in the US has been the Patient Protection and Affordable Care Act, better known as Obamacare or the ACA. The ACA was signed into law in March 2010 with the primary aim of enhancing access to affordable health insurance, particularly among low-income Americans, strengthening consumer protections within insurance markets, and championing innovation in health care delivery in order to improve quality and reduce the cost burden of the health care system in the US, which is substantially higher than that in other developed economies.

The ACA pursues these goals through a set of federal provisions that encourage adherence and penalize noncompliance—the most prominent and significant of those provisions are discussed briefly below:

  • The “Play or Pay” provision, also known as the Employer Mandate, requires employers (excluding smaller businesses that have less than 50 employers) to provide minimum essential coverage (MEC) for their employees or pay certain penalties; this is coupled with tax credits for small businesses that do cover certain insurance costs for their workers.
  • The Individual Mandate requires US citizens and Permanent Residents to obtain MEC or pay a monthly penalty tax.
  • The elimination of pre-existing condition exclusion practices prevents insurers from denying coverage or altering the cost of coverage for those with pre-existing health conditions.
  • The Medicaid expansion provision aimed to extend Medicaid to all Americans at or below 133% of the federal poverty line. However, in 2012, the US Supreme Court ruled that states cannot be coerced into expanding their own Medicaid programs, and that any such expansion would be optional for each state. The provision also requires the federal government to fully subsidize states that do opt to expand their programs until 2017, at which point reimbursement begins to gradually decline each year.

As a result of the ACA provisions, the uninsured population was halved by 2016, marking the most drastic decline in that group since the establishment of Medicare and Medicaid. Moreover, the CBO had indicated that, despite the spending required to implement the ACA, outcomes had actually reduced the budget deficit, and overall health care spending was ultimately hampered. Overall, the ACA was anticipated to have an overwhelmingly positive impact on medical device markets, due largely to the potential for vastly higher procedure volumes.

During the 2016 Presidential Election, however, one of then-candidate Donald Trump’s main campaign promises was to repeal and replace the ACA, arguing that the law has placed additional costs on Americans and restricts them from choosing their own insurance.

Erosion

Since coming into power in January 2017, the Trump administration has made numerous efforts to strike down certain provisions from the ACA, including multiple attempts to repeal and replace the ACA that were ultimately unsuccessful. Following these attempts, however, the administration made several moves to substantially weaken the ACA, either by increasing the cost of premiums and cost sharing, reducing ACA coverage, or making it more difficult to enroll.

These include cancelling promotional efforts to encourage enrollment—including TV ads and other outreach programs—shrinking enrollment periods, implementing extensive downtime periods on HealthCare.gov (which is the main means of enrolling), withdrawing enrollment assistance programs, and removing information surrounding application from some government websites and resources. In addition, numerous efforts were made to shrink the benefits provided under the ACA; for example, in October 2017, President Trump signed an executive order that calls for changes to group health insurance requirements; new regulations resulting from this order would reduce the number of benefits group plans are required to cover, which may turn healthier individuals away from the ACA and lead to higher premiums for the remaining, higher-risk individuals.

Similarly, the administration issued a rule in January 2018 that strengthens so-called associated health plans by allowing small groups (namely self-employed individuals and small businesses) to purchase health insurance together, thereby evading requirements for MEC; more recently, the administration issued rules to increase access to short-term plans that are not required to provide MEC, which may reduce enrollment and increase ACA premiums. Other efforts include the Department of Health and Human Services’ (HHS) expansion of the hardship exemption policy, which would allow more people to sidestep the requirements of the individual mandate.

While these are all notable attempts to undermine the ACA, perhaps most significant among the administration’s efforts was a provision in the tax reform bill passed by Congress on December 20, 2017—known as the Tax Cuts and Jobs Act—which reduced the individual mandate penalty to $0, effectively repealing the individual mandate and removing the penalty for not having insurance. This was followed by a lawsuit against the ACA—brought forth by a number of Republican state AGs, governors, and individuals—that argued that the effective repeal of the individual mandate renders the ACA unconstitutional, given that the Supreme Court’s decision in 2012 to uphold the law relied on the argument that the individual mandate (and therefore the ACA) was lawful due to Congress’ authority to issue and collect taxes. Now that there is no such penalty, their reasoning follows, the law is rendered unconstitutional.

In December 2018, a federal judge in Texas ruled that this argument was valid, essentially declaring the individual mandate as unconstitutional and thereby rendering the whole law invalid. Although this ruling immensely weakens the ACA and places its future in jeopardy, it does not immediately nullify it. It is widely expected that some states, led by California, will appeal the ruling, and that the case is likely to make its way back to the Supreme Court. Given that such a process will likely take months or years, it is unclear how this ruling will ultimately impact the ACA, but it is reasonable to expect that this will diminish Americans’ confidence in the law and negatively impact enrollment for 2019 and 2020, should the process go on till then.

Implications

One thing that remains clear, however, is that the Trump administration’s continued attacks on the ACA, especially the repeal of the individual mandate, are expected to significantly weaken enrollment and compliance. The Congressional Budget Office expects that the individual mandate repeal by itself will reduce the number of insured individuals by 13 million and increase premiums by as much as 10% by 2027. In fact, enrollment for 2019 has already shrunk by nearly 11% in comparison to the previous year’s rates—a continuation of the declining trend that started in 2017—and it is suggested that the primary cause for this has been the reduction in promotional efforts and the repeal of the individual mandate, as well as the availability of cheaper plans made available by the administration in the past year. However, it remains too early to confidently assess whether these factors have had an impact on enrollment rates, not to mention how strong this impact has been.

As it stands, there is not enough information to confidently discern a definitive impact on medical device markets, and other factors (such as falling unemployment, and challenges brought forth by the newly elected House of Representatives, where Democrats now hold a majority) may ultimately mitigate any negative impact arising from the challenges currently faced by the ACA—so far, the ACA has remained largely intact despite many difficulties. However, given that the implementation of the ACA substantially decreased the number of uninsured individuals when it came into effect, it is reasonable to expect that the Trump administration’s efforts to weaken (and potentially repeal) the ACA will continue to expand the number of uninsured Americans. This will likely reduce the number of individuals seeking out health care (especially of the elective variety), which will lead to a decline in procedure volume growth in the US.

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