The extreme polarization of American politics means that the national elections in November could have a profound effect on the fate of health-care reform. Much is potentially at stake for the economy, the health of the citizenry, and certainly corporate budgets. Here is what to expect, depending on how the elections turn out.

Scenario 1: Mitt Romney Wins, Democrats Keep a Senate Majority. A Democratic-led Senate would make it difficult to dismantle the Affordable Care Act (ACA) legislatively. But because the law is skeletal and leaves federal agencies with an enormous rule-making chore, Romney could push out regulations so slowly that the law is rendered virtually ineffective. He also could slow the government’s development of health exchanges for states that choose not to create their own.

But he may be careful in orchestrating those tactics. “The Romney campaign is criticizing the Obama Administration for using its powers in an imperial way that is not consistent with what Congress has mandated, in several areas,” notes William Sarraille, a health-care attorney with Sidley Austin. Romney, therefore, might be reluctant to invite like criticism.

Romney has said that on “Day 1” of his Presidency he would issue an order to stop implementation of the ACA. He probably wouldn’t have the authority to do that, though. Even if he did, an avalanche of lawsuits would be the likely result, says James Klein, president of the American Benefits Council, which advocates on benefits-related issues for about 350 large corporate members.

Scenario 2: Romney Wins, Republicans Take the Senate. In a Republican bid to repeal health reform, the main avenue open to minority Senate Democrats would be a filibuster, as long as Republicans have fewer than 60 seats. But for legislation that affects federal revenue, only a simple majority is needed to avert a filibuster. Because the U.S. Supreme Court ruled that the individual mandate provision of the health-care reform law was a tax, congressional Republicans could attach a repeal of the mandate to a budget bill and push it through with as few as 50 Senate seats (with, in that case, Vice President Paul Ryan casting the deciding vote). “That would leave the rest of the ACA in place, but its guts would be eviscerated,” says Klein.

Taking the more conventional approach to legislation would require care by the Republicans, as some provisions are very popular. For example, the law closed the “donut hole” in Medicare drug coverage, saving many seniors thousands of dollars per year. “We know older Americans vote more than younger ones,” notes Chantel Sheaks, a principal in government affairs at Buck Consultants. Another coveted provision is the coverage of children under parents’ insurance until age 26. “The children don’t vote a lot, but their parents do,” Sheaks says.

Scenario 3: Barack Obama Wins. The President doesn’t need a Democratic-controlled Senate to keep the ACA in place. He can veto any legislative efforts to undo it. The status quo will reign.

CFOs Sound Off
Hoping for a repeal or dilution of the health reform law, many finance chiefs are rooting hard for Republican triumphs in the Presidential and Senate sweepstakes (see “Brave New Market”). But in the meantime, they are not necessarily averse to using the law to their advantage. Indeed, the sluggish economy, the ceaseless upward spiral in health-care costs, and the impending creation of the health exchanges have more CFOs thinking about deep-sixing employee health benefits.

“Insurance risk is an unknown, and when you’re faced with health-care costs that are rising faster than other costs, it’s a risk that every employer is going to analyze, all the way to paying the [annual $2,000-per-employee] penalty [for not offering coverage],” says Richard Ramos, CFO at Maritz, a $2 billion provider of employee-motivation and incentive-travel programs.

The firm’s analysis of its 2012 health-care costs through May showed a 16% increase over the same period last year. “If the elections offer some relief on the impact of the [ACA], it would really help us out,” says Ramos.

Maritz is particularly concerned about having to offer health benefits to about 400 employees who work more than 30 hours but less than 40 hours per week beginning in 2014, as the law stipulates. Another worry for Maritz — which is an S corporation, whose earnings are passed through to its few shareholders to be taxed as ordinary income — is a new 3.8% tax on capital gains realized from certain investments that are ancillary to the firm’s business, like real estate, in which shareholders play only a “passive” role. The tax, inserted into the ACA by amendment in 2010 to help defray the costs of reform, takes effect next year.

Smaller firms with shallower pockets are hurting even more. Vacuum Process Technology, a $10 million firm in Plymouth, Massachusetts, is spending about $20,000 per month on health premiums, says CFO Dave Quimby. That’s on top of payments that companies in the commonwealth must make to support its ACA-like health-care program, signed into law by then-governor Romney in 2006. If the health reform law remains in place, the firm will have a strong incentive to drop its health-care coverage, Quimby says.

Tom Gillespie, president and financial overseer at Access Receivables Management, a collection agency, says health-care expenses are his biggest concern right now. “We will be forced to provide lower levels of care for employees [under the ACA],” Gillespie says. “It will also lead to hiring fewer full-time associates. It is a disaster waiting to happen.”

When the ACA is fully implemented, he says, Access will probably tell employees to seek insurance from the exchanges. “That will hurt them, because our current benefits are fairly generous and the coverage they’re going to get will be far worse,” says Gillespie.

Given the lack of clarity on how election results might change the health-care picture, some companies are waiting to move forward with new health-care plans. “At this point, we’re not sure what even a Romney Presidency and stronger Republican Congress would be able to accomplish in reversing Obamacare or making it ineffective by holding back funding for some provisions,” says Hank Funsch, CFO at Dayton T. Brown, an engineering, testing, and technical services firm. “We’re in a ‘wait-and-see’ mode at the present time.”

Health Reform Big Bang: January 1, 2014

• Health-insurance exchanges: State-run exchanges, or federally operated ones for states that choose not to have an exchange, are required to be created by January 1, 2013, and available for use exactly one year later. Many smaller companies are expected to drop health benefits and give employees a stipend to spend through the exchanges.

• Play or pay: A penalty for not offering “minimal essential” health coverage will be assessed to employers with more than 50 full-time workers. In most cases, the penalty, to be collected through corporate tax returns, will be $2,000 per employee per year.

• Waiting-period rollback: A maximum 90-day waiting period between new employees’ start dates and when their health benefits kick in will take effect. Many employers now use a longer waiting period, often six months.

• No-limit coverage: Group plans will no longer be able to impose annual dollar limits on the amount of coverage an individual may receive.

• No bias: Small group plans will not be able to charge higher rates based on gender or health status.

• Small-business tax-credit hike: The existing Small Business Health Care Tax Credit available for some small and midsize companies will increase from 35% of health-care spending to 50%.