President Trump is due to sign an executive order Thursday morning intended to allow individuals and small businesses to buy a long-disputed type of health insurance that skirts state regulations and Affordable Care Act protections.
The White House and allies portray the president’s move to expand access to “association health plans” as wielding administrative powers to accomplish what congressional Republicans have failed to achieve: tearing down the law’s insurance marketplaces and letting some Americans buy skimpier coverage at lower prices. The order will be Trump’s biggest step to carry out a broad but ill-defined directive he issued his first night in office for agencies to lessen ACA regulations from the Obama administration.
Critics, who include state insurance commissioners, most of the health-insurance industry and mainstream policy specialists, predict that a proliferation of such health plans will have damaging ripple effects: driving up costs for consumers with serious medical conditions and prompting more insurers to flee the law’s marketplaces. Part of Trump’s actions, they predict, will spark court challenges over their legality.
According to numerous people familiar with the White House’s anticipated order, the most far-reaching element will instruct a trio of Cabinet departments to rewrite federal rules for association health plans — a type of insurance in which small businesses of a similar type band together through an association to negotiate health benefits.
The order also is expected to expand the availability of short-term insurance policies, which offer limited benefits meant as a bridge for people between jobs or young adults no longer eligible for their parents’ health plans. The Obama administration ruled that short-term insurance may not last for more than three months; Trump is planning to extend that to nearly a year.
In addition, Trump’s action is intended to widen employers’ ability to use pretax dollars to help workers pay for any medical expenses, not just for health policies that meet ACA rules — another reversal of Obama policy.
The executive order will fulfill a quest by conservative Republicans, especially in the House, who have unsuccessfully sought for more than two decades to expand the availability of association health plans, allowing them to be sold, unregulated, across state lines.
As details of what the president is likely to sign spread in Washington in recent days, health policy experts in think tanks, academia and the health-care industry emphasized that the order’s final language — and the ensuing fine print from agencies’ rules — will determine whether the impact will be as sweeping or quick as Trump has boasted.
“It’s going to cover a lot of territory and a lot of people, millions of people,” the president said two weeks ago. On Tuesday, he added: “It will be great, great health care for many, many people.”
In an interview Wednesday night with Sean Hannity of Fox News, he again predicted a big impact. “People say 30 percent, some people say 25 percent and some people say it could be 50 percent,” Trump told Hannity. “It’s going to cover a large percentage of the people that we’re talking about.”
The action will come three weeks before the Nov. 1 start of the fifth open-enrollment season in ACA marketplaces for people who do not have access to affordable health benefits through a job. It is uncertain whether the departments — Health and Human Services, Treasury and Labor — will finalize rules carrying out the order in time for new insurance to be sold for 2018.
Even so, with a shortened sign-up period and large cuts in federal funds for advertising and enrollment help already hobbling the marketplaces, “if there’s a lot of hoopla around new options that may be available soon, it could be one more thing that discourages enrollment,” said Larry Levitt, Kaiser Family Foundation’s senior vice president.
The National Association of Insurance Commissioners (NAIC) is among the groups that have long opposed any expansion of coverage that bypasses state regulation. In congressional testimony in February, the NAIC said allowing health plans to be sold without requiring either state licenses or federal approval “would result in less protections for the most vulnerable populations and the collapse of individual markets.”
Under the president’s anticipated order, association health plans will be able to avoid many ACA rules, including the law’s benefits requirements, limits on consumers’ yearly and lifetime costs, and ban on charging more to customers who have been sick. Critics say that young and healthy people who use relatively little insurance would gravitate to those plans because of their lower price tags, while older and sicker customers would be concentrated in ACA marketplaces with spiking rates.
“It would be different pools under different rules,” said one senior health policy source who spoke on the condition of anonymity since the order is not yet public.
Currently, short-term health insurance makes up a tiny fraction of the policies sold, with fewer than 30 companies covering only about 160,000 people nationwide at the end of last year, according to NAIC data.
Experts could not point to figures for how many association health plans exist or how many people they insure. Such arrangements have existed for decades, and scandals have on occasion exposed “multi-employer welfare arrangements” started by unscrupulous operators who took members’ money and either did not have enough reserves to cover hospital bills or absconded with premiums.
The National Federation of Independent Business, the small-business lobby, has pressed Congress to allow use of association plans, arguing that they can be less expensive and give workers more insurance choices. This year, Sen. Ted Cruz (R-Tex.) pushed an amendment to unsuccessful ACA-repeal legislation that would have had a parallel effect, letting any insurer selling at least one policy that met the law’s coverage rules also sell skimpier and cheaper plans.
Selling health plans from state to state without separate licenses — the idea underlying much of the president’s anticipated order — has long been a Republican mantra. It has gained little traction in practice, however.
Before the ACA was passed in 2010 as well as since then, half a dozen states have passed laws permitting insurers to sell health policies approved by other states. And since last year, the ACA has allowed “compacts” in which groups of states may agree that health plans licensed in any of them could be sold in the others. Under such compacts, federal health officials must make sure the plans offer at least the same benefits and are as affordable as those sold in the ACA marketplaces.
As of this summer, “no state was known to actually offer or sell such policies,” according to a report by the National Conference of State Legislatures. A main reason, experts say, is insurers’ difficulty in arranging networks of doctors and other providers of care far from their home states.
What the president has in mind is different in important ways. Association health plans no longer will have to be licensed by a state in which they are sold, and they will not need approval under federal rules. In addition, individuals will be able to become part of associations — not just small businesses.
The prospect of letting individuals be part of these associations is the aspect of the executive order likely to draw legal complaints. The 1974 ERISA law, which permits large companies that insure themselves to do so with relatively little federal regulation, could be reinterpreted to apply to small businesses that band together, according to health policy experts familiar with the law. But ERISA does not apply to individuals buying coverage on their own.