Note: This story was last updated at 12:28 p.m. ET to reflect additional information from administration officials and other comments.
The Trump administration Thursday advanced a wide-ranging executive order aimed at expanding lower-cost insurance options, allowing employers to give workers money to buy their own coverage and slowing consolidation in the insurance and hospital industries.
Critics said that, if implemented, the changes could result in more bare-bones coverage and pull healthier people out of the already struggling insurance markets, leading to higher premiums for those who remain in more-regulated coverage.
President Donald Trump鈥檚 action, which will not take effect in time to affect the upcoming open enrollment for coverage in 2018, signals a shift in the administration鈥檚 strategy, which relied on Congress to repeal the Affordable Care Act. Trump is now using the force of his executive rule-making authority to implement long-favored GOP policy alternatives.
鈥淲ith Congress the way it is, I decided to take it upon myself,鈥� Trump said in remarks at the White House earlier in the week.聽Senate Republicans failed within recent months to pass legislation to overhaul the ACA.
Since Congress can鈥檛 get its act together on HealthCare, I will be using the power of the pen to give great HealthCare to many people 鈥� FAST
鈥� Donald J. Trump (@realDonaldTrump)
The executive order directs many agencies, including the Department of Labor, to consider proposing rules or new guidance to loosen current restrictions on what are called 鈥渁ssociation health plans鈥� and on selling low-cost, short-term insurance.
Such rules could potentially exempt such plans for a number of the requirements of the Affordable Care Act.
This order will 鈥渉elp millions of Americans who have been harmed by Obamacare,鈥� said Andrew Bremberg,聽 director of the Domestic Policy Council, who briefed the press.
The directive also instructs agencies to consider new regulations or guidance to:
- Permit the practice of providing a tax-free employer contributions through health reimbursement accounts that workers could use to buy individual market plans. The Obama administration had barred that practice. This adjustment might result in more employers dropping job-based coverage and simply giving workers money to buy their own plans.
- Report on steps federal and state governments could take to 鈥渋ncrease choice and reduce consolidation鈥� in the health care market. A senior administration official said Trump is concerned about the growing number of regions served by only one or two insurers or hospital systems.
Facebook Live Explainer: Things To Know About Trump鈥檚 Directive On Health Insurance
The Pros And The Cons
Associations are generally membership groups based on a profession or business. Proponents say allowing consumers to buy insurance through these organizations gives them more clout with insurers than they鈥檇 have buying their own plan on the individual market聽鈥� and results in lower premiums.
But the real savings in premiums is likely to come because the policies could offer fewer benefits than more regulated ACA plans, and the associations would have more leeway to set premiums based on the health of the group.
Trump鈥檚 order is likely to please some groups, including the National Federation of Independent Business. This organization has long supported association health plans, which it says allow small businesses to buy coverage across state lines.
Not all small businesses back association health plans, though, or the idea that they need help banding together to buy coverage.
鈥淭he truth is, that鈥檚 how they get insurance today and it鈥檚 called the small group market. Every state has one,鈥� said David Chase, spokesman for Small Business Majority, a group that supports the ACA.
鈥淲hat association plans would do is actually pull people out of those small group pools and start a bunch of new pools. That doesn鈥檛 band people together,鈥� he added.
Critics also warn that such plans, with pared-down coverage and lower premiums, could siphon off the healthiest consumers. Older, sicker people would be left to seek health insurance through more regulated plans available through state and federal insurance marketplaces. That could cause premiums to rise more rapidly for those groups.
The combination of allowing less-regulated association plans, making it easier for employers to send workers to buy their own coverage and making short term plans more broadly available 鈥渋s a concerted effort to undermine the individual market鈥� by drawing out the healthiest consumers, said Kevin Lucia, a research professor at Georgetown鈥檚 Health Policy Institute.
Still, some employers now sitting on the sidelines might end up adding workers to that pool, countered Chris Condeluci, a Washington, D.C., attorney who previously worked for Sen. Chuck Grassley (R-Iowa) and served as counsel to the U.S. Senate Finance Committee during the drafting of the ACA.
鈥淪ome will want to give workers a chunk of change to make sure they get coverage, but not be in the game of sponsoring a [group] plan themselves,鈥� said Condeluci.
Administration officials said Thursday that they had not studied the effect of the changes on the marketplace but might do so in the future.
Some consumer advocates also warn that association plans and short-term policies are generally less generous with benefits 鈥� and could leave some unwary consumers stuck with large medical bills. Such plans might not cover maternity care, for example, or prescription drugs.
Additionally, short-term plans can exclude paying for any preexisting medical conditions, either upfront or upon renewal, something the ACA bars for all other types of insurance.
Legal challenges to the executive order could result from these issues.
For one thing, policy experts question whether the Trump administration can allow associations broad leeway to sign up individuals, rather than following the Obama administration鈥檚 strict of 鈥渞are instances鈥� in which an association would qualify as an employer offering group coverage.
Trump administration officials said that issue would be studied as part of the consideration around setting new rules, but that the law may allow self-employed individuals to join associations.
Associations want to be designated as a large group because a complex mix of laws cover employment-based insurance coverage, and rules can differ from those governing small-group or individual coverage.
Large-group plans need not cover all 10 of the ACA鈥檚 鈥渆ssential health benefits,鈥� which include things like hospitalization, drug coverage, maternity care and substance abuse treatment.
They would have to follow other rules, however, such as the ban on setting annual or lifetime limits and the rule allowing parents to keep their children on the policy until age 26.
But insurers could聽vary premiums for large groups based on medical claims history of the overall group, so younger, healthier groups would likely get lower premiums.
In the individual market, insurers cannot base a premium on a policyholder鈥檚 health.
A Speckled Past
Association health plans are not new. They鈥檝e been around for decades, and Republicans have traditionally eyed them as a means to make it easier for small businesses and individuals to band together to buy insurance.
In the past, though, some had solvency problems and went bankrupt, leaving consumers on the hook with unpaid medical bills.
In several states, regulators investigated whether the plans were advertising that they had comprehensive coverage when, in fact, they for such things as chemotherapy or doctor office visits.
The ACA answered some of those concerns by setting minimum standards for coverage on most insurance policies, including association plans, which prevent them from skimping on such things as doctor visits or prescription drugs.
Their numbers fell after the sweeping law went into effect.
Meanwhile, the Trump proposal also would allow people to buy short-term plans that last up to 364 days, overturning an Obama administration rule limiting short-term policies to 90 days.
Advocates of the change have always argued that this limit simply meant people had to renew more often 鈥� and then face their deductibles all over again.
But How Will Associations Plans Fare?
Joe Antos, at the conservative American Enterprise Institute, questions how popular such plans would be with both consumers and insurers.
鈥淭he people on the left who say this will doom the exchange marketplace are, as usual, exaggerating the likely effects of this,鈥� said Antos.
That鈥檚 because many of the approximately 9 million people who currently buy coverage through federal or state insurance marketplaces get a premium subsidy to help them purchase. They are unlikely to switch from that, he said.
The main group that it would appeal to are the additional 10 million or so who buy coverage because they don鈥檛 get it through their jobs, and don鈥檛 get a subsidy.
Key will be just what the plans cover 鈥� and what they exclude.
鈥淭hey鈥檒l only be attracted if these association plans actually provide them coverage they want at a price that is better than the exchange plans,鈥� said Antos.