What the Senate twice failed to do, the White House is now doing by fiat: President Trump today signed an executive order to undercut several key provisions of the Affordable Care Act and once again transform the nation’s health insurance markets.
In his signing remarks, Trump said the executive order was, “Very very powerful for our nation” and outlined the key provisions he sought to change.
The order can’t entirely repeal and replace the ACA, as the President noted in his remarks, but it can take aim at certain key provisions. The specific changes the White House seeks are to:
- Expand Association Health Plans — less-regulated group insurance plans purchased collectively by similar sorts of employers — to permit any “association” to purchase policies across state lines
- Expand short-term limited-duration insurance — plans lasting only a few months intended to bridge gaps in coverage — to last longer and be available to more buyers
- Expand tax-privileged reimbursement accounts that employers can use to reimburse workers for healthcare costs
What will the effects be?
This is where it gets complicated.
In theory, Association Health Plans don’t sound like a bad idea. They let individuals and small employers band together to negotiate group insurance plans like the ones large employers provide for their employees.
But the non-partisan Kaiser Family Foundation notes that those plans could offer fewer benefits than plans which currently fall under regulation by the ACA. So while they would cost less, that would be because they provide less coverage, with higher deductibles and out-of-pocket costs for anyone covered under those plans.
Similarly, short-term limited-duration plans are currently exempt from many ACA requirements, as Trump noted in his remarks. These plans are currently limited to a maximum of three months, and they’re meant to provide basic coverage for individuals who are otherwise between coverage — when you’ve left school but haven’t left started your job, or are between jobs, for example.
The upshot of both policies, taken together, is that critics fear this executive order could split the insurance market into separate risk pools, leaving many Americans without coverage when they need it, and sending costs skyward for others.
Vox recently observed that a loophole in Tennessee law has allowed Association Health Plans to continue into the ACA era, with negative results.
The Tennessee association plan estimates that it has roughly 23,000 members enrolled in plans that are not ACA-compliant, Vox reports. Those 23,000 are, presumably, younger, healthier patients that don’t have need for extensive medical coverage at this time.
But insurance works, at a very basic and fundamental level, by pooling risk. Early insurers sold policies to a hundred ships; 99 made it back to shore safely and they only had to pay out for the one that sank. A car insurance company insures both good drivers and bad, and makes money by pocketing premiums from everyone who doesn’t need to file claims and distributing a smaller amount back to those who do.
A health insurance company theoretically works the same way: it takes in premiums from young and old, healthy and sick alike, and then only needs to pay out claims for a small percentage of its overall customer base.
But when you sell two tiers of plans, you end up splitting your pool into two tiers of customers, too. Younger customers, or those who manage to keep aging without developing a single pre-existing condition, opt for the cheaper, skimpier plans. That means that customers who are aging, and those who have ever had a disease or injury to contend with, end up having to pay significantly higher costs to obtain coverage that does what they need.
And that’s exactly what has happened in Tennessee: the state’s marketplace has some of the sickest participants in the entire country, Vox reports, and as a result also some of the highest premiums in the country.
The third tentpole of the executive order has to do with expanding “Health Reimbursement Arrangements,” which seems to be the Administration’s new catch-all term for Health Savings Accounts and other similar vehicles.
As we’ve explained before, HSAs are tax-advantaged accounts — the money comes out before your taxes are calculated, like 401(k) contributions.
These accounts largely exist to offset the high out-of-pocket costs individuals with high-deductible health plans face when seeking care. However, with changes that were proposed in the now-abandoned House effort to repeal and replace the ACA, these small tax shelters were poised to become bigger, better tax shelters for those who have money to squirrel away — a plan that the executive order now seeks to try to resurrect.
Is this binding? When will the law change?
The thing about an executive order is, it’s not quite actually law, all by itself. It’s a directive guiding law.
The President doesn’t issue regulation; Congress and the federal agencies do. So the executive order specifically asks several cabinet agencies — the Department of Labor, the Department of the Treasury, and the Department of Health and Human Services — to themselves investigate how best to make changes to the law to generate the outcome the White House wants.
So, as the fact sheet from the White House notes, the order “directs” Cabinet secretaries “to consider changes” to existing policies.
The various departments could, in theory, examine the directive, determine it’s unworkable, and return a consideration of “no.” That won’t happen, of course, but it is technically possible.
The Cabinet officials in question, instead, are friendly to the proposal — but making real change takes time, even for an agency that wants to move quickly. An administration official told CNN that actually crafting and enacting policy changes could take six months or more.
This story is developing, stay tuned for updates