Collision Course

One of our senior execs from the Midwest, a fellow Establishment Republican, dropped me an email in April.

“How’re you feeling about the Senate in November?” he asked.

“Great,” I said, “but we have an unlimited capacity to screw it all up between now and then.”

“Capacity?” he responded. “We don’t have capacity, we have a proven track record.”

Like second marriages being the triumph of hope over experience, I am (for the purposes of this column, at least) going to speculate on what a Republican Senate will mean for insurance brokers in the last two years of an Obama administration. This assumes a lot of things. It assumes Senate Majority Leader Mitch McConnell, R-Ky., survives his re-election campaign, and that Republicans don’t nominate the nut in Georgia to succeed retiring Sen. Saxby Chambliss, R-Ga. It assumes that three Democrat-held seats will flip, as widely predicted: Montana, West Virginia and South Dakota. It assumes that, of the remaining competitive races currently held by Democrats, at least three will fall. There is GOP competitiveness in Arkansas, North Carolina, Alaska, Colorado, New Hampshire, Louisiana, Michigan, Iowa and Virginia. Pick any three, and, if the GOP doesn’t screw up elsewhere, Mitch McConnell is no longer the Majority Leader. 

One other big assumption that many others would challenge: President Obama will have the political freedom to make a deal (he almost made a $5 trillion one with House Speaker John Boehner, R-Ohio, three years ago), and he will want a big-picture, lasting legacy that puts the nation on a path toward fiscal sustainability. I know, I know, fellow Republicans, hang with me here.

Chances of a big deal—a multiyear grand bargain that includes tax reform and Affordable Care Act revisions—depends on that confluence of Republican control of Congress, and a Democratic president who doesn’t want his final two years to consist only of foreign policy and the issuance of executive orders. This is probably a really good thing for America. And it’s got a bunch of potential pitfalls for brokers.

As noted previously in this space, any big tax reform puts the question of the employer/employee exemption from taxation for benefits on the table. This is where the right meets the left. Prominent GOP senators have proposed scaling back the exemptions under the theory that only pure consumer-driven healthcare will rein in costs. The administration likes it because the more employer-sponsored care migrates to the exchanges, the better off the fiscal viability of the ACA “marketplaces” that are currently an adverse-selection nightmare. Danger, Will Robinson!

A grand bargain also portends significant changes to the ACA. Don’t fix it, say the conservatives, replace it! At some point, political reality will dictate some accommodation on both sides. First of all, Republicans have struggled for years trying to articulate a comprehensive alternative (beyond med mal reform, association health plans, and interstate purchase…zzzzzzzz).

Second, if the fourth quarter of 2013 was a train wreck, all the political traction for Republicans was based on the perception of the “big lie” of how you get to keep your health insurance if you like it. It is indisputable that come 2015, millions of Americans—even if mostly sick and older ones—will have health insurance coverage through the exchanges of the ACA. For Republicans to “repeal” Obamacare, that’ll be millions of Americans who…lose their health insurance that they like.

So, something’s gotta give. Remember the fiscal cliff deal reached in late 2012 between Vice President Biden and Senator McConnell? It did all kinds of things to amend the ACA: repealed the “CLASS Act” long-term care plan, removed much funding from the ACA’s insurance co-ops and stuck it to Medicare Advantage plans.

You don’t remember it because it got very little attention and was in the context of a bigger fiscal deal. Much the same could occur. 

Potential “fixes” in an Obama/Boehner/McConnell deal include:

• The Medicaid “donut hole” wherein millions of Americans in red states aren’t eligible for either Medicaid or subsidies in the exchanges. A permanent exemption from the employer mandate for businesses under—and maybe even over—100. (Former Obama Press Secretary Robert Gibbs said as much in April but was slapped down—for the time being—by House Minority Leader Nancy Pelosi, D-Calif.) This is something unions would embrace in reasserting the sanctity of the 40-hour work week.
• Repeal or scale-back of some of the Obamacare taxes, most likely the medical device tax. A permanent “doc fix” on Medicare reimbursement rates. If we’re lucky and good, perhaps there can be broker-friendly provisions incenting private placements in the exchanges. The administration may have set out to disintermediate brokers, but increasingly it seems to understand the importance of partnership, even if the statute and the bureaucracy aren’t in tune with brokers.

Rep. Dave Camp, R-Mich., chairman of the House Ways & Means Committee, issued his blueprint for comprehensive tax reform in March. All of us lobbyists were in a tizzy, but the press collectively dismissed it. Camp is retiring (he will be succeeded as chairman by Rep. Paul Ryan, R-Wis.), and there’s zero appetite this year for tax reform. His bill touched healthcare only insofar as it would tax benefits to individuals/couples who exceed $400,000/$450,000 in income. Members on both sides of the aisle ran away from Camp’s proposal, but it could be the starting point of a potential congressional deal.

One of the downsides to writing this column is that too often my words are read back to me after a year or two, and I’m way off the mark. (At least I never would have written Dick Morris’s book, Condi vs. Hillary: The Next Great Presidential Race, in 2007.) Republicans may or may not screw it all up and squander yet another chance at capturing full control of Congress. But one thing is for sure: neither party is going to be in a position of “jamming” the other with impunity for the next few years. The GOP might win control of the Senate, but it won’t be by a filibuster-proof 60 votes, and it certainly won’t have the two-thirds majority required to overturn a presidential veto.

Quietly and maturely, Republicans in Congress seemed to have learned good lessons from the awful 2013 government shutdown over Obamacare. A two-year budget pact was reached. Boehner passed a debt limit extension with a minority of his House majority. No more hopeless showdowns appear on the horizon.

While expectations for the final two years of an eight-year presidency should always remain low, you don’t have to squint too much to envision the makings of a grand bargain if Republicans retake the Senate and maintain House control in 2015.

Just in time for the showdown of Hillary Clinton vs. Jeb Bush.