Trump's Executive Order on Obamacare

What Trump's executive order means to healthcare and the insurance industry.

“With these actions, we are moving toward lower costs and more options in the health care market, and taking crucial steps toward saving the American people from the nightmare of Obamacare... This is going to be something that millions and millions of people will be signing up for, and they’re going to be very happy. This will be great health care.” - President Donald Trump (10/12/2017)

Earlier today, President Trump signed an executive that takes a giant step to undermine the Affordable Care Act (ACA). Trump directed the Departments of Labor, Treasury, and Health and Human Services to create new rules to expand access to cheaper and skimpier insurance policies that could be sold by associations to their members. The order also allows greater flexibility for short-term medical policies to be sold to individuals and families. Both are significant moves to reverse or sabotage the current healthcare law known as "Obamacare". This move is not at all surprising since he has been very clear about his intentions and frustration with the failed attempts to repeal Obamacare in the Congress. The executive order has two significant parts:

1.) ASSOCIATION HEALTH PLANS: These are groups of small businesses that pool together to buy health insurance and, in theory, pool their larger resources to negotiate more competitive rates. These new association health plans would be considered large employers, and large employers are not subject to the same rules as individual or small-group policies under the ACA. These plans would likely offer cheaper plans with skimpier benefits not mandated under the individual and small group rules.

“The clear intent of the executive order is to create a parallel insurance market exempt from many of the consumer protections in the Affordable Care Act... This has the potential to siphon off healthy people with skinnier benefits and cheaper premiums, leaving behind a sicker pool of people under ACA plans.” - Larry Levitt at the Kaiser Family Foundation

Healthcare experts worry that creating a parallel market will undermine the ACA-compliant market and create more loopholes to buy health insurance outside the ACA markets, which experts say would destabilize the insurance market for customers who are left behind with higher premiums and fewer insurers. Under this plan, many association health plans would be exempt from the ACA requirements including covering essential health benefits.

“Two employers in an association can be charged very different rates, based on the medical claims filed by their employees,” - Mike Kreidler, Washington State Insurance Commissioner

I started my insurance sales career in 1988 in a market full of association plans, MEWA's, METs, and various association trust products. In those days, it was common to sell association health policies across state lines. These were the "wild west" days before California enacted small group health reform (Assembly Bill 1672 in 1992) which set new rules and guarantees for the small group market. California was, and still is, one of the most expensive states for health insurance in the country for a variety of reasons. So it was easy to sell a small group product that is substantially cheaper than our local state options. What was difficult was explaining to a policyholder that their claim was denied because they were enrolled in a plan (filed in another another state) which did not cover the same California state mandated benefits. Prior to the ACA, under some association models, consumers often did not understand the limits of the coverage they bought, leaving them without protections if they unexpectedly got sick.

“People were unfortunately very susceptible to junk insurance” - Karen Pollitz, Kaiser Family Foundation

The promise of delivering significantly lower premiums is (with rare exception) only achieved by offering skimpier coverage. Most of these multi-state association plans were also very volatile and many association plans went bankrupt, or exited the state because they were underpriced and did not fully understand the market dynamics and risk factors unique to the state. The Government Accountability Office reported in 1992, nearly 400,000 participants and beneficiaries in failed MEWAs (association plans) were left with over $123 million in unpaid claims from January 1988 to June 1991. It was also very confusing for consumers who also did not realize how limited their coverage was or how it complied with local laws and state mandated benefits until they filed a claim. The new executive order could potentially repeat this mistake and allow employers to form groups across state lines. It is unclear if individuals (like the self-employed) would allowed to buy into the association market. I'm a skeptic and so are the experts.

“It will destroy the small-group market... We’ll be back to where we were before the Affordable Care Act.” - Tim Jost, Washington & Lee University law professor

“The ability for individuals to purchase health insurance through an association really puts the individual market at risk and destabilizes it over the long term. When you have market segmentation, it over time leads to higher premiums and it becomes less attractive to carriers.” - Kevin Lucia, Georgetown University

2.) SHORT-TERM POLICIES: The executive order would also expand the duration of short-term limited insurance. Short-term policies typically have higher out-of-pocket costs and cover fewer services than traditional policies. Designed for people who are between jobs, these short-term policies were allowed to be in force for up to 364 days. Under the ACA, the duration was shortened to three months to prevent people from using these non-compliant plans to circumvent the more comprehensive ACA plans. About 160,000 people were covered under short-term health plans at the end of 2016.

Short-term policies could be appealing to people in counties where only a single insurer is offering plans in the Affordable Care Act marketplace. In 2018, more than 1,500 counties are expected to offer only one carrier option on their individual insurance marketplace. Expanding access to short-term policies may seem like a viable solution but it's no guarantee carriers would rush to serve these counties, even if allowed to limit benefits, and charge higher premiums to people with pre-existing medical conditions. The ACA eliminated these practices and relaxing the duration for short-term policies would be another set-back for the individual insurance market.

“The easier you make it not to buy comprehensive coverage, the harder you make it to buy comprehensive coverage,” - Katherine Hempstead, Robert Wood Johnson Foundation - health policy expert

“If you allow them to sell 364-day policies, or policies that are renewable, that’s just going to suck a lot of the healthy people out of the individual market,” - Tim Jost, Washington & Lee University law professor

SUMMARY: The executive order does not change anything immediately. The federal agencies must first adopt regulations, hopefully after an opportunity for public comments and bipartisan input. This process could take months so it's unlikely that anything will happen before the end of 2017.

Also buried in the executive order, Trump urged the Treasury Department to consider expanding the use of tax-free Health Reimbursement Arrangements that allow employers to provide workers with more money for healthcare expenses. The order also prompts federal agencies to take a closer look at how hospital and provider consolidation may be driving up costs in some areas of the country. These could be worthy efforts but are overshadowed by the harmful impact of rolling back these two ACA protections.

The state insurance commissioners (Republicans too), health plans and consumer advocates worry that undoing or weakening the ACA's federal standards would lead to a "race to the bottom" where health insurers flock to the states with the least stringent rules and weakest consumer protections.

“I do not believe that state insurance commissioners, nor state legislatures or governors, will look kindly to anything that would pre-empt our ability to protect our consumers,” - Al Redmer Jr., Maryland Insurance Commissioner (a Republican appointee)

No doubt, this is just the beginning and more executive orders will be issued to reinterpret or undermine the ACA without a Congressional vote. Scary.

Michael

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Who supports this? The National Federation of Independent Business, the National Association of Wholesaler-Distributors and the National Restaurant Association were very supportive of the executive order.

• “By allowing small businesses and individuals to join together to access health insurance through their association memberships, President Trump’s executive order provides more opportunity for Americans to purchase affordable healthcare coverage,” - Dawn Sweeney, President of the National Restaurant Association

Who is opposed? Strong opposition from the health care advocates, the American Academy of Actuaries and National Association of Insurance Commissioners:

• “...long expressed concerns with expanding association health plans in a manner that reduces consumer protections or solvency requirements that promote safe and sound markets. We also have concerns about the impact of such a proposal on already fragile markets.” - Ted Nickel, NAIC President and Wisconsin Insurance Commissioner
• “Today’s executive order jeopardizes the ability of millions of cancer patients, survivors and those at risk for the disease from being able to access or afford meaningful health insurance,” - Chris Hansen, president of the American Cancer Society’s advocacy arm