On October 12, 2017, President Trump signed an Executive Order addressing some provisions of the Affordable Care Act (ACA). The Order was described as “Promoting Healthcare Choice and Competition Across State Lines.”
The Order is comprised of seven sections. Generally speaking, it directs various administrative entities to issue guidance related to the topics covered. The Order itself contains a only high level view of the goals to change specific aspects of the ACA. Once the regulations are drafted and released, employers will have a better sense of how these changes may impact the market. In addition, legal challenges to this Executive Order are anticipated.
The Order states that it should be the policy of the Executive Branch to the extent consistent with law, to facilitate the purchase of insurance across state lines. The Executive Branch should also facilitate the development and operation of a health care system that provides high quality care at affordable prices for the American people.
The Trump Administration will prioritize three areas of improvement in the near term:
- Association Health Plans (AHPs)
- Short-term Limited Duration Health Insurance
- Health Reimbursement Arrangements (HRAs)
The Administration will also focus on promoting competition in health care markets and limiting excessive consolidation throughout the healthcare system. To the extent consistent with law, government rules and guidelines affecting the U.S. healthcare system should:
- Expand the availability of and access to alternatives to expensive, mandate-laden ACA insurance including AHPs, Short-term Limited Duration Health Insurance and HRAs
- Re-inject competition into the healthcare markets by lowering barriers to entry, limiting excessive consolidation, and preventive abuses of market power
- Improve access to and the quality of information that Americans need to make informed healthcare decisions, including data about health care pricing and outcomes, while minimizing the reporting burdens on affected plans, providers and payers
The policy section outlines near term goals of the Trump administration to improving healthcare access and affordability.
Expanded Access to Association Plans
The Order directs the Secretary of Labor to consider, within 60 days, proposing regulations or revising guidance in accordance with the law to allow more employers to form AHPs. The Secretary should also consider expanding the conditions that would define an employer under ERISA as well as ways to promote the AHP formation on the basis of common geography or industry.
The goal of promoting AHPs is to allow smaller employers to overcome the competitive disadvantage with large employees who are able to spread the risk among a larger pool of members. The Order also states securing coverage through an AHP will allow employers to avoid many of the costly requirements of the ACA. However, the Order does not detail which specific requirement AHPs will avoid.
The Order does not provide details on expansion of AHPs. More details will like be included in the proposed regulations or revised guidance.
Expanded Availability to Short-Term Limited Duration Insurance
Consider, within 60 days, proposing regulations or revising guidance in accordance with the law to expand access to Short-Term Limited Duration Insurance (STLDI). The Secretaries should consider allowing these policies to cover longer periods of time and to be renewed by insureds.
The goal is to offer an appealing and affordable alternative to Marketplace coverage. The ACA regulations limit the coverage period under these plans to three months.
The EO did not include the details on the expanded availability of these plans. The details on this provision will significantly matter to insurance carriers. STLDI policies are not obligated to comply with ACA coverage mandates. This will allow policies to be sold that don’t have to coverage essential health benefits. These policies may also be permitted to include annual and dollar lifetime maximums.
The effects of this provision of the Order are unclear. Depending the details, healthier individuals may gravitate to STLDI policies, while sicker individuals will remain in the comprehensive Marketplace policies. Insurance carriers could struggle to stay in the Marketplace as rates will increase to reflect poor experience. Many carriers may choose to exit Marketplaces over concerns they will not be able to operate profitably with a split risk pool.
Expanded Availability and Permitted Use of Health Reimbursement Arrangements (HRAs)
The Order directs the Secretaries of Treasury, Labor and Health and Human Services to consider, within 120 days, proposing regulations or revising guidance in accordance with the law to increase the usability of HRAs. The guidance should expand an employer’s ability to offer HRAs to their employees and allow HRAs to be used in conjunction with non-group coverage.
The goal of this expansion is to allow employees, especially ones that work for small businesses, more options for financing their health care. Small employers, however, can take advantage of Qualified Small Employer Health Reimbursement Arrangements (QSEHRA), which were included in the 21st Century Cures Act passed by the Obama Administration in 2016.
The Order does not include the details of this expansion of the HRA rules. HRAs are funded solely by employers and provide tax-favored funds to pay for eligible expenses not covered by the insurance plan. The ACA has instituted significant limits on the use of HRAs. In general, an HRA should only be provided to employees that are covered under the employer’s medical plan. Loosening these rules may allow employers to fund HRAs that employees can use to purchase individual insurance coverage.
The Order, by itself, does nothing to change existing law. It directs several federal agencies to consider and propose specific policy changes that, if implemented, would significantly change existing law. To change or implement new regulations, agencies must follow a notice and comment period. Agency regulations are subject to court review and a number of challenges to this Executive Order and any subsequent agency regulations should be anticipated.