President Trump Takes Steps When Senate Won’t

President Donald Trump signed an Executive Order that potentially weakens the Affordable Care Act (ACA). As quoted by the White House Press Office “The time has come to give Americans the freedom to purchase health insurance across state lines, which will create a truly competitive national marketplace that will bring costs way down and provide far better care.”

Association Health Plans

The Order is intended to allow employers to join together to form “association health plans” that can cross state lines. The Order also calls for expanded availability for lower cost, short-term policies, and increased use of tax-advantaged health reimbursement accounts (HRAs). Specifically, the Executive Order directs the US Secretary of Labor to consider expanding access to Association Health Plans (AHPs), which could potentially allow American employers to form groups across State lines. These AHPs, regulated by the Employment Retirement Income Security Act (ERISA), may be able to offer health plans that do not contain all of the mandated benefits of the Affordable Care Act (ACA). Hints of the changes to AHP may be found in the recent Better Care Reconciliation Act (BRCA) rejected by the Senate in July. It included AHPs that would not be subject to the ACA’s small group rules, would not have to cover the ACA’s 10 categories of “essential health benefits” and would have been able to develop premiums based on the “claims experience” of the group. AHPs would likely be sponsored by trade associations, organized primarily for professional or industry-related purposes.

Expansion of Short-Term Policies

This Order also is intended to expand the use of short-term policies from the current limit of 90 days to longer durations.  The order directs the Departments of the Treasury, Labor, and Health and Human Services to consider expanding coverage through these low-cost short-term limited duration insurance (STLDI). STLDIs are not subject to ACA mandates and would offer an alternative for individuals in counties with only a single provider of ACA exchange coverage, who missed the open enrollment window for the exchange, or who is unemployed.

The last major prong of the Order is to increase the use of employer health reimbursement accounts (HRA)s. The Order states that Americans are departing the ACA exchanges and choose to pay the law’s penalty instead. It cites the following statistics:

• 500,000 fewer Americans enrolled in an ACA plan in 2017 compared to the prior year.
• Current exchange enrollment is 60% below what the Congressional Budget Office expected when the law took effect.
• 6.7 million Americans chose to pay the ACA penalty in 2015 rather than purchase insurance on the exchanges. 37% of penalized households made less than $25,000, and 79% of penalized households made less than $50,000.

As envisioned by the Order, HRA accounts is a way for employers to provide some funding to employees, who will have greater flexibility and control over their health care costs. President Trump’s  Executive Order advances some of the changes that Congress has not been able to pass. It is likely that change based on the Order will not happen until 2018, as the various departments begin the long and laborious task of developing new regulations to support this Executive Order.

For more information on this topic, contact your Health Care or Employee Benefits counsel at Smith, Gambrell & Russell, LLP.