WASHINGTON — President Donald Trump signed an executive order Thursday morning intended to allow small businesses and potentially individuals to buy a long-disputed type of health insurance that skirts state regulations and Affordable Care Act protections.
The White House and allies portray the president’s move to expand access to “association health plans” as wielding administrative powers to accomplish what congressional Republicans have failed to achieve: tearing down the law’s insurance marketplaces and letting some Americans buy skimpier coverage at lower prices. The order is Trump’s biggest step to carry out a broad but ill-defined directive he issued his first night in office for agencies to lessen ACA regulations from the Obama administration.
Critics, who include state insurance commissioners, most of the health-insurance industry and mainstream policy specialists, predict that a proliferation of such health plans will have damaging ripple effects: driving up costs for consumers with serious medical conditions and prompting more insurers to flee the law’s marketplaces. Part of Trump’s actions, they say, will spark court challenges over their legality.
According to White House and agency officials, the most far-reaching element of the multiprong order instructs a trio of Cabinet departments to rewrite federal rules for association health plans — a type of insurance in which small businesses of a similar type band together through an association to negotiate health benefits.
The order will expand the availability of short-term insurance policies, which offer limited benefits meant as a bridge for people between jobs or young adults no longer eligible for their parents’ health plans. The Obama administration ruled that short-term insurance may not last for more than three months; Trump will extend that to nearly a year.
In addition, Trump’s action is intended to widen employers’ ability to use pretax dollars in “health reimbursement arrangements” to help workers pay for any medical expenses, not just for health policies that meet ACA rules – another reversal of Obama policy.
Other aspects of the order are less specific: commissioning a study, to be led by federal health officials, of ways to limit consolidation within the insurance and hospital industries; and directing agencies to find additional means to increase competition and choice in health care to improve its quality and lower its cost.
Briefing reporters on Thursday morning, Andrew Bremberg, director of the White House’s Domestic Policy Council, made clear that the president’s order is merely the “beginning” of actions the administration intends to take unilaterally to help “Obamacare’s victims.”
In one sense, the executive order fulfills a quest by conservative Republicans, especially in the House, who have unsuccessfully sought for more than two decades to expand the availability of association health plans, allowing them to be sold, unregulated, across state lines.
As details of what was forthcoming spread in Washington in recent days, health policy experts in think tanks, academia and the health-care industry emphasized that the order’s final language – and the ensuing fine print from agencies’ rules — will determine whether the impact will be as sweeping or quick as Trump has boasted.
“It’s going to cover a lot of territory and a lot of people, millions of people,” the president said two weeks ago. On Tuesday, he added: “It will be great, great health care for many, many people.”
In an interview Wednesday night with Sean Hannity of Fox News, he again predicted a big impact. “People say 30 percent, some people say 25 percent and some people say it could be 50 percent,” Trump told Hannity, without explaining who he had in mind. “It’s going to cover a large percentage of the people that we’re talking about.”
The action comes three weeks before the Nov. 1 start of the fifth open-enrollment season in ACA marketplaces for people who do not have access to affordable health benefits through a job. A senior administration official, speaking to reporters on the condition of anonymity before Trump signed the order, said that the policy changes it sets in motion will require agencies to follow required procedures to write new rules and solicit public comment. That means new insurance options will not be available in time for coverage beginning at the start of 2018.
Even so, with a shortened sign-up period and large cuts in federal funds for advertising and enrollment help already hobbling the marketplaces, “if there’s a lot of hoopla around new options that may be available soon, it could be one more thing that discourages enrollment,” said Larry Levitt, Kaiser Family Foundation’s senior vice president.
The National Association of Insurance Commissioners (NAIC) is among the groups that have long opposed any expansion of coverage that bypasses state regulation. In congressional testimony in February, the NAIC said allowing health plans to be sold without requiring either state licenses or federal approval “would result in less protections for the most vulnerable populations and the collapse of individual markets.”
Under the president’s order, association health plans will be able to avoid many ACA rules, including the law’s benefits requirements, limits on consumers’ yearly and lifetime costs, and ban on charging more to customers who have been sick. Critics warn that young and healthy people who use relatively little insurance will gravitate to those plans because of their lower price tags, leaving older and sicker customers concentrated in ACA marketplaces with spiking rates.
“It would be different pools under different rules,” said one senior health policy source who spoke on the condition of anonymity since the order is not yet public.
Hours before the president’s signature, the Society of Actuaries similarly condemned the order, saying in a statement: “Healthier consumers will likely be able to enroll in plans with lower insurance rates, while more medically complex consumers may be subject to significant rate increases. Further, there will likely be an increase in solvency risk for association health plans, contributing to market instability.”
Currently, short-term health insurance makes up a tiny fraction of the policies sold, with fewer than 30 companies covering only about 160,000 people nationwide at the end of last year, according to NAIC data.
Experts could not point to figures for how many association health plans exist or how many people they insure. Such arrangements have existed for decades, and scandals have on occasion exposed “multi-employer welfare arrangements” started by unscrupulous operators who took members’ money and either did not have enough reserves to cover hospital bills or absconded with premiums.
The National Federation of Independent Business, the small-business lobby, has pressed Congress to allow use of association plans, arguing that they can be less expensive and give workers more insurance choices. Sen. Rand Paul, R-Ky., has promoted the idea and attended the Roosevelt Room signing ceremony. Over the summer, Sen. Ted Cruz, R-Texas, pushed an amendment to unsuccessful ACA-repeal legislation that would have had a parallel effect, letting any insurer selling at least one policy that met the law’s coverage rules also sell skimpier and cheaper plans.
Selling health plans from state to state without separate licenses – the idea underlying much of the president’s order – has long been a Republican mantra. It has gained little traction in practice, however.
Before the ACA was passed in 2010 as well as since then, half a dozen states have passed laws permitting insurers to sell health policies approved by other states. And since last year, the ACA has allowed “compacts” in which groups of states may agree that health plans licensed in any of them could be sold in the others. Under such compacts, federal health officials must make sure the plans offer at least the same benefits and are as affordable as those sold in the ACA marketplaces.
As of this summer, “no state was known to actually offer or sell such policies,” according to a report by the National Conference of State Legislatures. A main reason, experts say, is insurers’ difficulty in arranging networks of doctors and other providers of care far from their home states.
What the president has in mind is different in important ways. Association health plans no longer will have to be licensed by a state in which they are sold, and they will not need approval under ACA rules, though a senior administration official says they will still need to meet requirements for all types of insurance. In addition, individuals will potentially be able to join associations — not just small businesses. The officials also said rules might be loosened so that small business could come together for the sole purpose of buying insurance — something now not allowed.
The prospect of letting individuals be part of these associations is the aspect of the executive order likely to draw legal complaints. The 1974 ERISA law, which permits large companies that insure themselves to do so with relatively little federal regulation, could be reinterpreted to apply to small businesses that band together, according to health policy experts familiar with the law.
But ERISA does not apply to individuals buying coverage on their own. A senior administration official said such plans might become available to some individuals, such as ones who are self-employed.