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How to interpret Trump's executive order regarding the ACA

January 23, 2017

    On Friday—in between the inaugural parade and inaugural balls—Trump issued an executive order that directs federal agencies to take steps to ensure the government's implementation of the ACA minimizes the burden on impacted parties (individuals, states, etc.).

    The order instructs agencies to "waive, defer, grant exemptions from, or delay implementation of provisions" that place a "fiscal burden on any State" or that impose a "cost, fee, tax, penalty, or regulatory burden" on stakeholders including patients, providers, and insurers. Importantly, the order states that any changes should be made only to the extent "permitted by law" and should comply with the law governing administrative rule-making.

    The order does not, however, provide specifics on next steps or provisions that will be reexamined. Predicting how agencies and their new heads will respond to this order is impossible at this point. The quick take is that the order is best viewed as a symbolic step reaffirming Trump's focus on repealing the ACA and an effort to show that he is keeping his campaign promise to deal with the ACA on his first day.

    Importantly, although the intent of the executive order is to unwind ACA, Republicans have been saying they will not "pull the rug out" from under people with coverage through the ACA, so any actions by the executive branch will have to be reconciled with Republicans' efforts to repeal and replace with minimal market disruption.

    The current thinking is that Republicans may need to take near-term action (either legislatively and/or administratively) to shore up the markets until their replacement plan takes effect. It is not clear how any actions taken based on this order will align with the efforts to maintain functioning markets. In addition, the order does not seem to have been coordinated with Congressional Republicans, so it is unclear how this align with the legislation they are developing.

    A few initial thoughts on what this means, what it doesn't mean, and what you should take from it:

    What this means

    • The order signals that the Trump administration intends to keep its promise to repeal the ACA and will press to ensure that changes to the ACA happen.

    • The order suggests that the administration will look to make administrative changes in addition to relying on legislative efforts. Possible administrative changes include broadening exemptions to and/or reducing enforcement of the individual and employer mandates, reducing essential health benefits requirements, and granting states greater flexibility in administering Medicaid and/or regulating insurance markets.

    • The order also confirms that the administration intends to use standard regulatory processes to pursue any administrative changes. For major changes, the process often includes issuing a proposed rule and providing a comment period before issuing a final rule, which can take months to complete. But there are also minor changes that can be made more quickly through "sub-regulatory" guidance.

    What this does not mean

    • The executive order does not immediately unwind any part of the ACA. Rather, as mentioned above, the order instructs agencies to work through the standard regulatory process, which takes time. It is highly likely that regulatory action won't begin until new officials are confirmed by the Senate and in place. The only immediate impact is some increase in uncertainty for market.

    • The order also does not provide any authority to ignore or alter portions of the ACA that are set in law. While the administration can certainly impact the effectiveness of portions of the ACA through regulatory action, Congress will still need to act if Republicans are to repeal or adjust many of the key pieces of the ACA.

    • The order's impact on the individual insurance market is unclear. There are questions about the extent to which the administration can defang the individual mandate penalties without legislative changes, in addition to previous questions about whether the penalties are sufficiently sized to drive significant enrollment numbers. Additionally, premium subsidies have been a major driver of enrollment (in 2016, 83% of exchange enrollees received some level of subsidy) and the executive order does not imply any focus on the subsidies. CBO recently projected that while complete elimination of the individual and employer mandate would lead to 18 million fewer people with insurance, some individuals would continue to purchase insurance in the individual market as long as subsidies remained.

    How you should interpret this

    • This order is indicative of the unpredictable environment that surrounds health care reform in coming weeks and months, and the health care industry is likely to face continued uncertainty.

    • The executive order is mostly symbolic and unlikely to have any immediate impact. Agencies don't have any new authority that they didn't have on Thursday and the administration says that it will comply with legal requirements and standard regulatory processes in making changes.

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