October 9, 2017

Trump this week could sign order to loosen health plan regulations

Daily Briefing

    President Trump this week is expected to sign an executive order that would scale back some health insurance regulations.  

    12 things CEOs need to know in 2018

    Executive order details

    According to the Wall Street Journal, the executive order is intended to expand health insurance options for U.S. residents who purchase coverage individually or work for a small employer. The executive order also is intended to lower premium costs for such individuals, the Journal reports. A Trump administration official said the executive order aims to promote competition in the health insurance market.

    Association health plan changes

    The executive order likely would include broad instructions for the Department of Labor, the Department of the Treasury, and HHS to explore how they can ease regulations to make it easier for individuals and small businesses to purchase insurance through so-called "association health plans" (AHPs), according to an administration official. Under the executive order, U.S. residents would be able to pool together to purchase health insurance outside of their respective states through the AHPs, the Associated Press reports.

    The Affordable Care Act (ACA) already allows states to enter compacts to permit the sale of individual health plans across state lines. However, few insurers have elected to participate in part because insurance regulations vary by state and it can be costly and cumbersome for insurers to create plans that adhere to various state rules. State-led efforts also have failed for similar reasons.

    According to the Journal, AHPs under the executive order would be exempt from state rules and some ACA requirements, including the law's mandate that insurers cover certain health benefits. As a result, health insurers could sponsor less-comprehensive and lower-cost plans.

    Short-term health plan changes

    In addition, the executive order is expected to direct federal agencies to scale back regulations that curbed the purchase and use of short-term health plans, the Journal reports.

    U.S. residents who are enrolled in short-term health plans are not considered to have insurance for the purposes of the ACA's individual mandate. HHS under former President Barack Obama barred insurers from allowing individuals to remain enrolled in short-term health plans for more than three months, down from one year. HHS also prohibited individuals from re-enrolling in the plans once they expired.

    According to the Journal, the executive order would again allow U.S. residents to remain enrolled in short-term health plans for nearly a year.

    Health reimbursement account changes

    Further, the Journal reports that the executive order likely would direct federal agencies to expand the use of employer-funded health reimbursement accounts, which individuals could use to pay for out-of-pocket medical expenses. According to Axios' "Vitals," U.S. residents under the executive order would be able to use the accounts to purchase private health plans. The Obama administration had prohibited individuals from using pre-tax employer funds in the arrangements to purchase private coverage, the Journal reports.

    Reaction

    Sen. Rand Paul (R-Ky.) said [AHPs] "would let plumbers, carpenters, welders, or any type of small business band together to get group health insurance." He continued, "Literally any group—your church, the National Rifle Association, the American Civil Liberties Union—any group of people who choose to do so could offer cheaper, better health insurance."

    Andy Slavitt, who served as CMS' acting administrator under Obama, said the executive order's "aim is clearly to do with the pen what Congress wouldn't—eliminate pre-existing condition protections, essential benefit protections and lifetime caps, and turn the ACA into a sparsely available high-risk pool."

    Cori Uccello, a senior health fellow at the American Academy of Actuaries, said the executive order could "cause a bifurcation of the market" as healthy individuals are drawn to enroll in lower-cost health plans that offer fewer benefits, leaving higher-risk and sicker individuals in an insurance pool that would have higher costs.

    Larry Levitt, a senior vice president at the Kaiser Family Foundation, suggested the executive order could face legal challenges "that could slow this effort down."

    Rhett Buttle, director of private sector engagement at HHS under Obama, said there needs to be "more options for small business, but AHPs are not the answer" because "they allow cherry picking that could undermine the traditional small group market." He continued, "Additionally, they could lead to premium instability for small businesses and put some of their consumer protections at risk" (Radnofsky et al., Wall Street Journal, 10/7 ; Radnofsky et al., Wall Street Journal,  10/8; Thomas/Alonso-Zaldivar, AP/Sacramento Bee, 10/9; Pear, New York Times, 10/7; Baker, "Vitals," Axios, 10/9).

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