Last Tuesday, Republicans made significant gains in the midterm elections. When all was said and done, they increased the size of their majority in the House of Representatives and retook control of the Senate. The Republicans now control both chambers of Congress for the first time since 2007, and are eager to advance their agenda when the new Congress is sworn in next January. Republican control of Congress could impact a number of different industries, including senior housing. Congressional Republicans would like to make some significant changes to the Affordable Care Act, and if they are successful, senior housing providers all across the country could feel the impact.
The New Congress Aims to Tackle the Affordable Act
The Affordable Care Act was passed during President Obama’s first term without a single Republican vote. Since its passage, Republicans in Congress tried numerous times to repeal the law. Although bills that would do this passed the House of Representatives, they always died in the Senate. This is largely due to the refusal of the chamber’s Majority Leader, Democratic Senator Harry Reid, to put these bills up for a vote. However, that will all change in January when Republicans officially take control of the Senate. When that happens, the Senate Majority Leader will change from Harry Reid to Republican Senator Mitch McConnell. McConnell stated on multiple occasions that he intends to have the Senate vote on changes to the Affordable Care Act.
To be certain, the outright repeal of the Affordable Care Act will not happen while President Obama is in office. After re-election to another term in the Senate last week, Mr. McConnell acknowledged as much, but also said that he believes there are at least three changes that should be made to the Affordable Care Act, and he intends to hold votes on them in the new Senate. These changes are: repealing the new medical device tax that was a part of the law; changing the definition of a full-time work week from 30 hours to 40; and repealing the individual mandate, which requires individuals to have health insurance or pay a fine, and the employer mandate, which requires businesses with the equivalent of over 50 full-time employees to offer affordable health insurance to their full-time workers or also pay a fine. The change that would make the largest impact on the senior housing industry is a repeal of the employer mandate.
The employer mandate is expected to significantly increase operating costs for many senior housing providers when it starts to take effect next year. Depending on the number of full-time employees a provider has, the cost of complying with the mandate could reach into the millions of dollars every year. This cost increase will result in lower net operating incomes and valuations for the providers that are affected by it, and will also affect other areas such as hiring practices, the amount of hours they allow employees to work, and wages and benefits. For all of these reasons, the senior housing industry made it clear to Congress that the employer mandate will hurt them. The House of Representatives acted on their concerns by passing bills to repeal the law, but those bills were never brought up in the Senate. However, if the Senate is able to pass a bill that would repeal or restrict the employer mandate when Republicans take control next year, then the ball will then be in President Obama’s court, and he could either sign the bill into law or veto it and leave the mandate intact as it is. Although Mr. Obama said that he will veto any bill that repeals the Affordable Care Act in its entirety, he also said that he is open to making changes that would improve the law.
Time will tell if a bill repealing or restricting the employer mandate is one of those changes. In the meantime, senior housing providers who wish to take advantage of the industry’s strong dynamics by purchasing additional properties for their portfolios before issues with the Affordable Care Act start affecting their profits should contact the Chicago-based financing firm Cambridge Realty Capital to learn more about the many different financing options that it offers for acquisitions and other purposes.