Washington, DC, USA: President Donald Trump resorted to an Executive Order Thursday after repeated Republican efforts to repeal the Patient Protection and Affordable Care Act, often shortened to the Affordable Care Act or nicknamed Obamacare, have failed. Ostensibly intended to provide more options for people shopping for health insurance, Trump’s Executive Order will allow small businesses to band together and join their own, unregulated insurance plans that can offer less coverage at cheaper prices. Obamacare rules would not apply to these plans, meaning they can drop coverage for things like maternity care, mental health services, and prescription drugs.
The order directs the Labor Department to make it easier for groups of employers to band together for the purpose of offering insurance. In some cases, groups might purchase coverage across state lines — a move that Republicans have long advocated as a way to lower costs.
“The competition will be staggering,” Trump said. “Insurance companies will be fighting to get every single person signed up. And you will be, hopefully, negotiating, negotiating, negotiating. And you will get such low prices for such great care.”
Crucially, these off-market plans would open the door for people with preexisting health conditions to be charged higher rates. That could leave behind a disproportionately sicker, and thus more expensive, group that needs the protections of Obamacare, driving up prices for those still on the small group or individual markets.
“I just keep hearing repeal and replace, repeal, replace, well, we’re starting that process,” Trump said Thursday, calling the order a first step “to providing millions of Americans with Obamacare relief.”
The order does not appear to go as far as the plan pushed by Kentucky Sen. Rand Paul, which would have allowed individuals to leave the markets as well as small businesses. Health experts told BuzzFeed News that Paul’s broader plan was akin to “repealing the ACA without Congress.”
“President Trump is doing what I believe is the biggest free market reform of health care in a generation,” Paul, who attended Thursday’s signing ceremony at the White House, said.
Trump’s order Thursday allows small businesses to band together to form “health associations” and buy their own group insurance plans outside of Obamacare markets.
Whereas the Affordable Care Act attempted to keep costs down by pushing as many people as possible into a single insurance pool with regulated, robust health plans, Trump’s order incentivizes healthy people and businesses with healthy employees to leave the markets.
Associations could self-select by accepting only businesses with healthy employees. If a business has enough employees that require expensive health care, premiums for everyone in that workplace could be jacked up. By doing this, associations can keep their prices down and price out the most expensive workers.
Companies that can’t afford to stay in an association would then have to turn to the regulated small group market, or have their employees get coverage on the individual market, where they can’t be denied coverage.
But if enough healthy people join associations under Trump’s new order, prices on the Obamacare markets will rise — potentially dramatically.
The president’s order also calls for expanding access to short-term insurance policies, which are not subject to some of Obamacare’s coverage requirements. And it directs the Health and Human Services, Labor and Treasury departments to make it easier for employers to offer tax-free reimbursement to employees to help cover deductibles, copayments and other health care expenses.The Obama administration feared people would use the plans as a loophole to avoid regulations on insurance, and capped their length at three months. Trump’s order would allow people to stay on these temporary plans for up to a year.
Some states will likely challenge the executive order in the courts and argue the Trump administration is misusing its regulatory powers to make new policy rather than going through Congress — a charge Republicans frequently made against Obama.
One quirk of the new executive order is that in order to allow businesses to form their own associations, Trump is not altering the Affordable Care Act but rather another law altogether — the Employment Retirement Income Security Act of 1974, known as ERISA. This was the law that created these health association insurance plans outside of federal and state regulations.
ERISA plans have traditionally been used by large companies that self-fund their own insurance plans, and millions of people get their health insurance through this kind of insurance today. Trump’s order would open up these plans not just to coworkers but to any group of companies “in the same line of business.”
While the order does not fully repeal Obamacare, as Trump has repeatedly vowed to do, it could go a long way to reshaping it. If the administration is lax on enforcement and allows virtually any businesses to band together to form an association, it could create two distinct insurance pools — an unregulated one covering predominantly healthy people, and a more expensive regulated one for those who need more health care.
Trump described his action as a response to reduced insurance offerings and rising premiums in Obamacare’s individual market.
Critics complain the president’s move could make matters worse — offering a cheaper option for younger, healthier insurance customers but driving up prices for those who need coverage most.
Broader access to so-called association health plans, or AHPs, is an idea that has been promoted by Sen. Rand Paul, R-Ky.
“President Trump is doing what I believe is the biggest free-market reform of health care in a generation,” Paul said during a signing ceremony in the White House Roosevelt Room. “This reform, if it works and goes as planned, will allow millions of people to get insurance across state lines at an inexpensive price.”
State regulators and some insurance companies warn that association plans might cherry-pick the healthiest customers, offering discounted insurance to those who don’t use a lot of medical care but driving up costs for others. Administration officials downplayed that concern, noting that association plans must offer coverage to any employee in a participating group.
All of the changes will be subject to a formal rule-making process, including a public comment period. Administration officials said any new insurance offerings would come in months, not weeks.
Trump said Thursday’s order is not a substitute for congressional action, and he vowed to continue to press lawmakers to repeal the Affordable Care Act.
“Today is only the beginning,” Trump said. “In the coming months, we plan to take new measures to provide our people with even more relief and more freedom.”
Critics argue that the Trump administration has deliberately tried to sabotage the Obamacare exchanges. Trump has repeatedly threatened to withhold cost-sharing subsidies from insurance companies, and he has slashed spending on marketing efforts to bring more customers into the exchanges.