Unexpected Elections Results = Potential Use of the “Reconciliation Process” to Pass Legislation

Back in my October blog post, What Health Care Policy Might Look Like After the 2024 Presidential Election, I told you what health care policies I could see coming out of (1) a Harris-Walz Administration OR (2) a Trump-Vance Administration. Note that it was October, before the November 5 election. And before we knew which political party would win the White House.

Well, it’s December. And we now know who the President-elect is. We can expect a Trump-Vance Administration to potentially pursue health care initiatives like Medicaid Reform; Price Transparency; Health Care Claims Data-Sharing; PBM and Patent Reforms; And Expanding Health Savings Accounts (HSAs), Direct Primary Care, and Telehealth.

Although the Presidential election results are impactful, even more so may be the fact that voters effectively supported Republicans in general, resulting in not only an incoming Republican President, but Republican majorities in both the House of Representatives and the Senate.

Why is that a big deal?  

Because Republicans will control all of Washington, DC (i.e., the White House, the Senate, and the House) at least for 2025 and 2026.

Why is that a big deal?  

Because Republicans will have the opportunity to add Republican policies to existing law through an obscure legislative process call the “Reconciliation Process.”  

What is the Reconciliation Process?

In short, the Reconciliation Process is an exception to the general rule of legislating in the Senate. Under the general rule, at least 60 votes are needed to pass legislation in the Senate. But legislation that is run through the Reconciliation Process (called a “reconciliation bill”) only requires 51 votes for passage.

However, to take advantage of this 51-vote exception, specific rules dictate what policy changes can be included in an underlying reconciliation bill and what cannot.  

The most important requirement is that a policy change must have a “direct” impact on (1) government spending or (2) tax revenue. If a policy change has too “indirect” of an impact on spending or taxes, this policy must be removed from the reconciliation bill.

Who decides whether a policy change has a “direct” or “indirect” impact on spending or taxes?

The decision lies with the Senate Parliamentarian, who is an individual that works for the Senate and is a person who is required to follow the Senate’s long-standing parliamentary procedures, and also, past decisions made by previous Senate Parliamentarians that examined whether similar policy changes had a “direct” or “indirect” impact on spending or taxes.

It’s important to note that the Parliamentarian is non-partisan and is required to set aside politics when rendering any decisions. As you would expect though, the decision reached will impact the parties differently.

How are the Republicans expected to use the Reconciliation Process?

It is expected that House and Senate Republican Leadership will use the Reconciliation Process to pass an extension of the 2017 Tax Cuts and other tax policy changes promised on the Presidential campaign trail. Obviously, these policies have a “direct” impact on taxes, so they would fit the criteria to be included in a reconciliation bill.  

Republicans may also use the Reconciliation Process to pass energy policy changes. It’s a bit of a tougher analysis, but most energy policies have been found by previous Parliamentarians to have a “direct” impact on spending. And, a lot of energy policy is run through the Tax Code (e.g., tax credits and even excise taxes), so these types of changes are also a strong possibility on being included in a reconciliation bill.

Immigration and border policy, however, is something that will likely be difficult for Republicans to change through a reconciliation bill. This is because past Senate Parliamentarians are on record ruling that immigration/border policy has too “indirect” of an impact on spending and taxes, and therefore, these changes cannot be included in a reconciliation bill. But, it may not stop Republicans from trying this approach.

What about a health care reconciliation bill?

First and foremost, I do not expect that Republicans will try to “repeal and replace” the Affordable Care Act (ACA) through the Reconciliation Process. Republicans aren’t about to set themselves up for failure…again.  

But, I do expect that House and Senate Republican Leadership will examine whether they should limit the tax preference for employer-sponsored health coverage (known as the “exclusion”).  

Why? Because Republicans will need “offsets” to pay for things like extending the 2017 Tax Cuts or reforming Medicaid, and limiting the exclusion raises billions of dollars in tax revenue for the government.  

Efforts to limit the exclusion are not new: Democrats limited the exclusion – through the Cadillac Tax – which was included in the ACA but ultimately repealed before ever taking effect. Since the ACA was enacted through the Reconciliation Process, we know that any policy that somehow limits the exclusion can rightly be passed in a reconciliation bill…assuming it can get 51 votes.  

A health care reconciliation bill might also include changes to the ICHRA rules. For example, adding a new “Class” of employees to the current list of “Classes.” Also, modifying the ICHRA contribution age variation limitation from 3-to-1 to 5-to-1 (this would effectively increase the contribution amount an employer can give to older workers relative to younger workers in the same “Class”).  I could also see Republicans allowing an employee to access the ACA’s premium subsidy as well as the employer’s ICHRA contribution, where the premium subsidy amount would be reduced dollar-for-dollar by the employer’s contribution.

Buckle-up: 2025 is going to an interesting policymaking year.

The information provided does not, and is not intended to, constitute legal advice; instead, all information and content herein is provided for general informational purposes only and may not constitute the most up-to-date legal or other information. This summary is provided by a consultant to Benefitfocus.com, Inc., and any opinions expressed within do not necessarily reflect those of Benefitfocus.com, Inc. or its affiliates and are not intended to provide specific advice or recommendations for any plan or individual.    

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