President Trump on Thursday signed an executive order intended to ease some health insurance regulations and create an avenue for certain health plans to bypass requirements under the Affordable Care Act (ACA)—which some policy experts say could jeopardize the insurance market, depending on how agencies implement the order.
Executive order details
The executive order does not implement any immediate policies, but instead directs federal agencies to consider changes that would loosen federal requirements on association health plans, short-term health plans, and employer-funded reimbursement accounts.
According to the Wall Street Journal, it will take the federal government months to implement any new regulations because the executive order requires the agencies to determine several key details, which will be subject to formal rulemaking and require a public comment period.
Association health plans
The executive order includes broad instructions for the Department of Labor (DOL) to develop new regulations that would expand access to so-called "association health plans" (AHPs), which allow small businesses to band together to purchase insurance.
According to Vox, it remains unclear how the administration would increase access to such plans, as DOL will be tasked with developing those changes through a formal rulemaking process. In the order, Trump suggested reinterpreting what types of employers are eligible to form an association health plan under the Employee Retirement Income Security Act (ERISA).
Vox reports that some industry experts have said DOL under the order also could ease federal rules that require associations to be from the same state. The agency also might classify AHPs as large employer plans—which unlike individual and small-group plans do not have to adhere to the ACA's essential health benefits requirement.
Short-term health plans
In addition, the executive order directs federal agencies, including HHS, to consider changes that would increase access to short-term health plans.
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. Prior to that individuals could remain in such plans for up to one year. HHS also prohibited individuals from re-enrolling in the plans once they expired.
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Industry experts say the executive order seeks to reinstate the year-long coverage period for short-term health plans and to allow individuals to renew such plans. Tim Jost, an emeritus professor at Washington and Lee University, said such changes could cause more young, healthy enrollees to leave the individual market, as short-term policies tend to be lower cost because they offer minimum coverage.
Larry Levitt, a senior vice president at the Kaiser Family Foundation, said a question left unanswered by the executive order is whether "people who buy short-term insurance plans [will] be made exempt from the individual mandate penalty." He added, "If so, they could really take off."
Health reimbursement accounts
The executive order also directs federal agencies to consider changing regulations for employer-funded health reimbursement accounts, which individuals can use to pay for out-of-pocket medical expenses. The executive order seeks to expand the way enrollees can use such accounts, such as to help pay premiums for private coverage, which currently is prohibited.
Observers mixed on how the order could affect the health insurance market
Observers have been mixed on how the executive order could affect the health insurance market. For instance, Republicans have argued that relaxing several of the policies addressed in the executive order would lower premium costs, particularly for healthy individuals, while Democrats have said loosening the regulations could lead to turbulence in the individual insurance market.
Rep. John Yarmuth (Ky.), the top Democrat on the House Budget Committee, said the executive order "has the potential to be very disruptive," adding that he does not think health insurers "are prepared to actually deal with" the new regulations.
Levitt said, "If association and short-term plans can siphon off healthy people, the ACA-regulated market would be left with a sicker pool to cover." He added, "How much damage the executive order can do to insurance markets under the ACA will depend on arcane details in regulations yet to come."
Dirk Van Dongen, president of the National Association of Wholesaler-Distributors, lauded the executive order, saying, "Small to midsize businesses have very little leverage in the insurance market" and "[a]nything that allows them to amalgamate their purchasing power will be helpful."
Order could face legal challenges
Legal experts have said rules implemented as a result of the executive order likely could face legal challenges because it could violate federal laws, such as ERISA.
According to Reuters, ERISA allows associations to act as employers to manage health benefits. However, Allison Hoffman, a professor at the University of Pennsylvania School of Law, said federal regulators typically have interpreted ERISA to mean employers in an association have to possess a common interest beyond purchasing insurance. In addition, Hoffman said states could challenge the executive order for impeding on states' authority to regulate insurance.
Massachusetts Attorney General Maura Healey (D) in a statement Wednesday said she "will oppose any attempt to undermine" Massachusetts' commitment to provide health care access to its state residents, Reuters reports (Pear/Abelson, New York Times, 10/11; Sullivan, The Hill, 10/11; Radnofsky et al., Wall Street Journal, 10/11; Alonso-Zaldivar, AP/Washington Post, 10/12; Baker, "Vitals," Axios, 10/12; Pierson/Raymond, Reuters, 10/12; Liptak, CNN, 10/12; Scott, Vox, 10/12; Cancryn, Politico, 10/12; Levitt tweet , 10/12; Levitt tweet , 10/12; Levitt tweet , 10/12).
Here's your cheat sheet for understanding health care's legal landscape
With MACRA, HIPAA, the ACA, and countless others, the health care landscape has become an alphabet soup of legislation. To help you keep up, we've created a series of cheat sheets for some of the most important—and complicated—legal landmarks.
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