President Trump signed an executive order Thursday that would allow healthy people to buy cheaper health insurance if they are unsatisfied with plans offered on the Affordable Care Act (ACA) marketplace. Why? Because the plans under the executive order offer much more limited coverage.
Following the Republicans’ failure to pass their latest Obamacare repeal measure last month, Trump is using his executive authority to accomplish what Republicans couldn’t. Under the GOP bill, ACA enrollees would be offered lackluster plans, with cheap premiums — plans that would be unusable for people with a pre-existing condition or people who later develop a medical condition because plans fail to cover what they need. Many senators expressed concern about the impact of the legislation on vulnerable populations.
The executive order will not take immediate effect, as key details are being left for federal agencies to work out through rule-making. The order should be open to the public for comment when the rule is posted. A White House official said Thursday that the order is just the “beginning” of the administration’s actions pertaining to the ACA.
The move could break Trump and the GOP’s promise to protect sicker people’s access to affordable insurance. (Talking Points Memo has a good timeline of all the moments the GOP promised to cover people with pre-existing conditions.) Trump vowed to safeguard these consumers as a candidate, and later as the president. Now, with a stroke of a pen, he has gone back on his word, again.
This is how, as the order is threefold: it would allow small businesses (like a group of freelancers), and possibly individuals, to band together and buy insurance like a large employer would; these are called association health plans. These plans could be exempt from some Obama-era rules like the requirement that insurers cover essential health benefits, such as maternity care or mental health.
The order says “associated health plans cannot develop premiums based on health conditions.” Health policy expert Timothy Jost told ThinkProgress “they [insurers] could not discriminate against employees individually but may be able to against small groups of employees and would certainty be able to eliminate essential health benefits and take other steps to make coverage very unattractive to individuals with health care problems.”
The order also calls for expanded access to short-term health plans, which are bare-bones plans that are exempt from the health law’s regulations. Short-term health plans use “medical underwriting” that allow insurers to use health information to evaluate applicants; this practice commonly excludes people with pre-existing conditions from coverage. Under current health law, people can only have these plans for three months, but Trump’s executive order would extend their lifespan to a year, per the request of some Senate Republicans.
Insurers and health policy experts worry healthier enrollees will buy these cheap, skimpy plans instead of purchasing private plans on the ACA marketplaces, leaving mostly sick patients to purchase ACA plans.
Anything that creates a parallel insurance market for healthy people will lead to unaffordable coverage for sick people.
— Larry Levitt (@larry_levitt) October 10, 2017
When unhealthier people, who require high-cost care, are the only ones left in the marketplace, insurance companies will need to raise premiums exponentially or leave. Under this scenario, the ACA marketplace, which serves 21 million people, will inevitably implode.
Finally, the order not only encourages healthy people to leave the ACA marketplace, but steers sicker people to purchase plans there. Trump’s order would make it easier for employers to set aside money, tax-free, to help employees purchase health plans. A concern from insurers, first reported by Axios, is “employers might be able to offer coverage to their younger employees, while using these new funds to shift older workers, who tend to have higher health care costs, into the individual market.”
The executive order comes at a time when the ACA marketplace has been fairly stable, despite politicized rhetoric to the contrary. A mid-2017 market performance review from the Kaiser Family Foundation reported “data from the first six months of 2017 offer further evidence that the individual market has been stabilizing and insurers are regaining profitability, even as political and policy uncertainty clouds expectations for 2018.”
During the order ceremony, Trump said “many” people enrolled in the ACA marketplace will have no insurance options. This is not true. As of September 27, the last day insurers could have pulled out, there were no bare counties.
There’s a pretty good sense that provisions of the executive order could destabilize the marketplace. Georgetown University Health Police Institute first pointed out an instance where one provision of Trump’s executive order is already in effect: in Tennessee.
Through a state law loophole, people are still able to buy association health plans sold through the Tennessee Farm Bureau. These plans are able to sell non-ACA compliant plans. As many as 73,000 people are enrolled in these plans. It’s hard to definitively say that these plans made the ACA marketplace in Tennessee “ground zero” for insurers pulling out. But it doesn’t help. A Society of Actuaries report found that, in 2015, the population enrolled in ACA-compliant plans in the state had the worst overall health risk score in the country. An insurance marketplace needs healthy and sick people to round out. This is insurance 101.