President Donald Trump’s first several days in office resulted in a flurry of executive orders. Each day brings a new slate of executive actions to interpret, some of which are largely symbolic with accompanying photo-ops and others that will have a real and immediate impact. The actions have covered issue areas as diverse as terminating the Trans-Pacific Partnership (TPP) and implementing a hiring freeze for most federal agencies, to resurrecting a Reagan-era policy that forbids foreign nongovernmental organizations that receive federal funding from performing or promoting abortion services through their work in other countries. Trump also ordered a freeze on any pending regulations and he signed an administrative order to halt a fee rate cut on certain mortgages.
At this stage, what matters to the restaurant industry’s business model, are actions taken related to the Affordable Care Act (ACA) and the U.S. Labor Department’s (DOL) overtime regulations.
Affordable Care Act
As promised, on his first day in office, President Trump took steps to undo the Affordable Care Act (ACA). In one of his first executive orders, Trump pushed the secretary of Health and Human Services (HHS) and other federal agencies to begin weakening the law. Expect any sweeping changes to move in tandem with action by congressional Republicans operating under the mantra “repeal and replace.”
It is important to note that the incoming HHS Secretary, six-term Congressman Tom Price, has been at the center of the GOP’s efforts to reform ACA. Republicans in the House and Senate are starting to roll out ACA reform proposals this week. In terms of timing, since the new HHS Secretary has yet to be confirmed, no major changes should be expected overnight.
The significance of Trump’s first executive order, in reality, has only a minor effect on current policy because it does not grant the administration any powers that it did not already have. On the other hand, it signals to the public that change is coming. It also advises HHS employees that they are expected to be part of that change.
Section 2 of the order instructs the HHS secretary to “exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay” parts of the law that would place a fiscal burden on states, individuals or healthcare providers. Most of the provisions in the ACA cannot be changed by HHS or the president altogether; they require action from Congress or a lengthy period involving public comment.
It is reasonable to assume that Section 2 is targeted at the things HHS can change like the individual mandate. The individual mandate requires most people to have health insurance or face a tax penalty. At least that is how the mandate was interpreted during the Obama administration. This has always been the most contentious part of the law. In reality, the HHS secretary can grant hardship exemptions to the mandate as he or she sees fit.
Under the Obama administration, the hardship exemptions were granted to people who earned below 138 percent of the federal poverty limit and lived in states that did not expand Medicaid, (or experienced a handful of other life circumstances, including homelessness or domestic violence). But there is nothing preventing the HHS secretary from granting hardship exemptions to everyone who does not have insurance, rendering the mandate meaningless. That authority existed before the executive order was issued, but Trump’s action removes any potential doubt.
Plus, it is a clear signal to the folks at HHS about their bosses’ itemized list of priorities. However, granting broad exemptions without other changes could cause chaos in the insurance marketplaces created by the ACA that mainly cover people without employer-sponsored coverage. Insurance companies rely on a mix of patients — healthy, sick, young, old — to balance out the money they gain through premiums and the money they dole out for health care. Without an individual mandate, younger, healthier people will very likely leave the marketplace, wreaking havoc within insurance plans and sending premiums rocketing up for those left behind. A blanket hardship exemption is much easier said than done.
The ACA also includes a mandate that insurance plans cover a set of services without charging for them (beyond monthly insurance premiums). It is up to HHS to lay out the specifics. For example, a section of the ACA says contraceptives must be provided to insured women free of co-pays or deductibles. That’s not written in the law; it was part of how the law was interpreted by the Obama administration. By one estimate, that interpretation saved women $1.4 billion in out-of-pocket spending from 2012 to 2015. Another estimate found savings of $483 million in a single year. The contraceptive mandate has been highly controversial and the subject of a U.S. Supreme Court case. It is likely to be one of the first provisions to go, but other provisions may be on the chopping block as well. Wholesale changes could fundamentally alter health insurance plans and the overall market.
There are other important signals in the short executive order. It says HHS should “encourage the development of a free and open market in interstate commerce” and “provide greater flexibility to states.” This suggests Trump will push HHS to grant more flexibility to states in how they implement the law. While the changes referenced in Trump’s order were possible before it was signed, he has now made his intentions clear through one of his first acts as president – The Department of Health and Human Services should get to the dismantling of the ACA “to the maximum extent permitted by law.”
Expect all of these potential changes to run parallel with congressional Republicans’ efforts with constant activity over the coming months.
USDOL Overtime Rule
In an executive order, President Trump froze all new Obama administration regulations. The court-ordered delay in the implementation of the new rule coupled with this action (while redundant) may be the “final nail in the coffin.”
The most pressing questions on the table include – Will the Justice Department under Trump continue the appeal of the preliminary injunction filed under Obama? (Highly unlikely); Will U.S. District Judge Amos Mazzant follow his preliminary injunction with a permanent one? (Probably, based on the judge’s language in his November decision.) Options for the survival of the overtime rule are becoming fewer and fewer by the day.
Overall, Trump’s executive actions are more symbolic than impactful, for now. They serve as political statements and set the tone for what is to come. In terms of existing policy that directly affects business models, nothing is different today than it was last week but now we are witnessing the start of some momentum in the direction of actual changes.
As of this writing, Trump’s nominee for HHS Secretary is sitting through a contentious Senate confirmation hearing so it will be days before significant policy changes materialize.