Synthetic Repeal: Trump’s Latest ACA Sabotage Attempt
While congressional Republicans have failed (for now) to repeal the ACA through legislation, Donald Trump remains committed to dismantling the ACA any way he can. On October 12, 2017, Trump signed an executive order (EO) on healthcare that he claims will provide more health insurance access; in reality, this EO is a brazen attempt to sabotage the Affordable Care Act (ACA, aka Obamacare).
The order has no immediate impact and merely instructs various federal agencies to revisit the rules governing the sale of association health plans and short-term limited duration insurance.
Read on to learn more about what the order means and how to resist the latest Trump administration attempt to undermine the ACA.
What are Association Health Plans?
Trump’s EO encourages the Secretary of Labor to consider rule changes that would encourage the formation of association health plans. Association health plans (AHPs) are arrangements in which small businesses get together to buy health insurance for their employees as a large group to increase their bargaining power. Before the ACA was passed in 2010, multi-state AHPs could pick one state’s insurance rules to follow, setting prices and coverage requirements accordingly. To keep prices low, AHPs would often choose state rules that had the laxest insurance regulations; as a result, the plans tended to cover fewer benefits, offering cheap but skimpy coverage to primarily younger, healthier buyers. Because AHPs can pick which state regulations to follow, it makes oversight of these plans complex and challenging. Historically, multi-employer insurance plans like AHPs have gone bankrupt thanks to a lack of oversight mechanisms and provisions like reinsurance that protect insurers.
AHPs are regulated under the same federal standards as the individual/small group insurance market. Consequently, the ACA regulations for individual marketplace plans — e.g. required coverage of essential health benefits, restrictions on pricing discrimination based on health status and/or gender, guaranteed access to coverage, and actuarial rules about plan design — applied to most AHPs as well.
The ACA left a loophole that lets some AHPs avoid ACA regulations by qualifying as large group plans, which are not subject to the same ACA regulations as individual market plans. Under a federal law called the Employee Retirement Income Security Act (ERISA), an AHP can be treated as a large group plan if it meets the ERISA standard for being a “bona fide group or association of employers.” For this to happen, the businesses joining together to form the AHP must have an organizational relationship with each other beyond their shared participation in the AHP (e.g. shared participation in a trade organization). Member businesses must also directly or indirectly control the AHP, essentially acting as one big employer in their shared governance of the plan. AHPs that meet the ERISA “bona fide” standard can be treated as large group plans. Unlike individual market plans, large group plans can:
- Offer plans that do not cover at least 60% of total healthcare costs
- Offer plans that don’t cover essential health benefits (including things like maternity care and mental health services)
- Deny insurance to small businesses who apply for coverage
- Charge people more for insurance based on factors besides age and tobacco use (the only two criteria for which individual market plans can charge higher rates)
- Increase rates without a prior review to determine if such rate increases are reasonable
In states like Oregon, AHPs have used the ERISA standard to bypass ACA regulations and offer less expensive but less comprehensive insurance plans.
Trump presumably intends for the Secretary of Labor to loosen ERISA standards for treating AHPs as large group plans, allowing more of these plans to be exempt from ACA requirements.
What is Short-Term Limited Duration Insurance?
Short-term limited duration insurance (STLDI) refers to policies with relatively high out-of-pocket costs and limited coverage. STLDI plans are designed for people who are temporarily out of work or otherwise unable to access insurance, and they are not subject to ACA regulations. Unlike ACA marketplace plans, short-term plans can deny coverage to people with preexisting conditions and impose lifetime and annual spending caps. These plans also do not have to cover essential health benefits and have much higher annual out-of-pocket spending caps than ACA marketplace plans. ACA marketplace plans have an annual out-of-pocket spending limit of $7,150 for an individual plan and $14,300 for a family plan, but STLDI plans have spending maximums ranging from $7,000 to $20,000 for just three months of coverage; these out-of-pocket maximums often exclude the cost of deductibles, further exposing consumers to significant financial risk.
Before 2016, STLDI plans covered enrollees for up to a year. However, federal regulators decided to shorten the coverage period to three months because insurance companies were effectively selling these plans as primary insurance policies while dodging ACA requirements for long-term insurance plans. Additionally, younger and healthier consumers were exiting the ACA marketplace to buy these short-term plans as their primary coverage; this in turn puts them at increased risk for medical bankruptcy while making the group of people buying ACA marketplace plans disproportionately sicker and costlier to insure. For these reasons, America’s Health Insurance Plans, the primary US insurance lobby, strongly supported the three-month limit on short-term policies.
Trump’s EO will presumably encourage government agencies to reverse this time limit, encouraging young and healthy insurance purchasers to rely on these inadequate plans for their primary insurance.
What does Trump’s EO mean for the ACA?
Trump frames his EO as a way of promoting competition among insurance plans and providing greater access to consumers. However, the arrangement he’s proposing has historically been unpopular with insurers and has failed to provide adequate protections for consumers with serious health issues. Health insurance groups like the National Association of Insurance Commissioners fear the de-regulation of AHPs and STLDI plans could encourage both small businesses with healthy employees and healthy individual consumers to exit the individual market, leaving state-based insurers with a pool of sicker and older consumers who are costlier to insure. In fact, insurance executives are reportedly already considering rate hikes in direct response to the EO’s provisions.
It remains unclear exactly what changes federal agencies will propose to increase availability of AHPs and STLDIs. However, health policy experts from both ends of the political spectrum agree that implementing Trump’s EO will be complicated and fraught with legal issues, since it will affect both federal and state-level insurance regulations. Some of the rule changes proposed by agencies will need to go through a public comment period, giving the public the chance to speak out against this scheme to sabotage the ACA through the sale of junk insurance plans.
Your voice has saved the ACA several times this last year, and once again you’ll need to speak up against these proposed rule changes. Once we have more information, 5calls.org will have the right calls for you to make to prevent this attack on our healthcare.
