The midterms are over: what do the results mean to employers?

After months of contentious campaigning, the 2022 midterm election is finally in the rearview mirror, although some races are yet to be decided. With the Democrats retaining the Senate and Republicans winning control of the House, gridlock is the likely outcome, as division between the two parties continues.

Despite the Democrats’ better-than-expected election performance, President Biden will be challenged to get legislation passed in the divided Congress. Battles over federal funding and Congressional investigations will create a combative environment in which virtually no significant legislation will make its way to the president’s desk. As a result, we are far more likely to see action in the form of new regulations enacted by various agencies than laws emerging from the halls of Congress.

That said, employers will need to pay close attention to what’s going on in Washington as there are a number of key issues they will have to deal with.   

With the Republicans in control of the House, the Ensuring Telehealth Expansion Act and Telehealth Benefit Expansion for Workers Act are likely to see movement and may receive bi-partisan support.

As the new Congress gets to work, employers will have to respond to several other items, including:

• The expiration of the COVID-19 public health and national emergencies, which will impact cost and payment of COVID-19 testing, vaccine and treatments; telehealth (if not extended by Congress); HIPAA special enrollments; COBRA enrollments and payments; and health care flexible spending account claim submissions.
• Proposed Nondiscrimination in Health Programs and Activities rule from the Department of Health and Human Services (HHS).
• Continued adoption of the Transparency in Coverage final rules (2020 – Internal Revenue Service, Employee Benefits Security Administration, Health and Human Services).
• Changing and inconsistent health care access legislation at the state level including, but not limited to, abortion and reproductive health and transgender-inclusive health care.

Focus on Medicare Advantage and spending

The newly seated Congress is likely to address federal Medicare Advantage payment reform in earnest as they seek to remove financial excesses that have built up in the system over time. This issue has been top-of-mind for some time in Congress and the federal agencies, but a recent federal court decision and subsequent New York Times article brought Medicare Advantage payment reform front-and-center for the Department of Justice and into the broader public consciousness.

Employers can expect federal action aimed at recouping overpayments from specific plans and directly addressing broader acceptable plan practices going forward. In addition to addressing potential health plan fraud, this initiative is especially important given the current federal debt position and expected ongoing budget deficits and is likely to be one of many initiatives undertaken to reduce federal spending.

The new Republican House has also set their sights on the Affordable Care Act (ACA) subsidies that were extended in the Inflation Reduction Act (IRA) as part of the American Rescue Plan Act of 2021 (ARPA) through 2025. They may include these subsidies in their potential across-the-board reductions to the federal budget as they seek to reduce federal spending, federal debt and inflation. Employers will need to track developments here and determine how their position may change if the ACA subsidies are reduced in some fashion.

While SECURE 2.0 has bi-partisan support, the Biden Administration’s Department of Labor is expected to address some politically divisive issues through regulation next year. The proposed rule on Prudence and Loyalty in Selecting Plan Investment and Exercising Shareholder Rights, often called the ESG rule, was proposed last year and generated both negative and positive responses. The final rule is expected to be released soon. It is nearly certain that many Republicans will strongly oppose it and legal action will follow. In addition, the DOL has committed to issue a revised fiduciary rule after a federal court, in 2018, vacated the rule promulgated under the Obama administration. When this new rule is proposed, a strong negative response from Republicans is likely.

Little in the way of new legislation is expected to emerge from the halls of Congress over the next two years, but that doesn’t mean employers can turn a blind eye to the happenings in Washington. Lingering proposals, regulatory action and 11th-hour deals will create significant changes in the areas of health, wealth and retirement. Carefully monitoring and being prepared to take action will prove necessary moving forward.