Obamacare 101: How Trump might 'use the power of the pen' to overhaul healthcare

President Trump, who has been unable to get Republicans in Congress to roll back the Affordable Care Act, is promising to issue an executive order this week that he says will offer relief to consumers facing rising insurance premiums.

Administration officials are reportedly looking specifically at ways to loosen health insurance regulations and promote wider use of a form of insurance known as association health plans.

Here is a rundown of how these plans work and what the administration’s moves could mean for Americans and their health insurance.

What is an association health plan?

Association health plans have traditionally allowed individual Americans or small businesses to band together to get health insurance in the same way a large business does on behalf of its workers.

Some associations are independent. Some have been sponsored by a trade group or some other organization.

Proponents of these plans have argued they give small employers and individuals the ability to secure the same kind of benefits and lower prices that large employers have been able to get.

But association health plans historically have also been a way to circumvent regulations on health plans.

What’s the advantage of less regulation?

Conservatives have long argued that loosening requirements on what health plans must cover will bring down prices, making coverage more affordable to more Americans.

Critics of the Affordable Care Act blame the many new regulations in the 2010 law for major rate hikes around the country in recent years.

The law, often called Obamacare, prohibited health plans from turning away sick consumers, banned annual and lifetime limits on coverage and, just as importantly, barred insurers from charging sick people more.

Additionally, the law mandated that health plans cover a basic set of benefits, including prescription drugs, maternity care and mental health and substance abuse services.

Several of the unsuccessful Republican legislative proposals this year to roll back the law would have allowed states to relax some of these rules.

Could the president do the same thing on his own?

He almost certainly couldn’t scrap the insurance protections altogether. They are part of the law and could therefore only be changed by an act of Congress.

More likely, the Trump administration will argue it has authority to allow some health plans, like association health plans, to get out from some requirements in the law.

Would that mean lower prices?

It might for some people.

A health plan that offers fewer benefits could cost less.

And a less comprehensive health plan would be attractive to healthier consumers, who might conclude they don’t need a plan that covers prescription drugs or mental health services because they don’t use those services.

What’s wrong with that?

There are two problems with allowing health plans to offer limited benefits, as many did before the Affordable Care Act.

First, many more Americans could be left with inadequate coverage.

In the past, patient advocates frequently found consumers did not understand the limits of the coverage they bought, leaving them without protections if they unexpectedly got sick.

Second, allowing less comprehensive health plans back into the market makes health coverage more expensive for sick people.

How does that work?

Health insurance depends on pooling risk, so it is shared among many people.

Some people are healthy and use little medical care. Others may be sick or have an accident that forces them to use more medical care.

If they are all in a single pool, the risks are shared so people who need medical care don’t have to pay more for their coverage.

But allowing healthier people to leave the pool and get less comprehensive coverage will make sicker patients – who may need coverage for mental health services or for expensive medications – pay more.

Over time, that can destabilize an insurance market as insurers are forced to charge more and more for the sickest patients, according to experts like the American Academy of Actuaries.

“Ultimately, higher-cost individuals and small groups would find it more difficult to obtain coverage,” the academy warned earlier this year.

That is why proposals in the past to expand the use of association health plans have been viewed suspiciously by state regulators, patient advocates and even some insurers.

Legislation in the early 2000s to allow more association health plans drew opposition from more than 450 national and local organizations around the country.

The National Governors Assn. warned at the time that the plans “would be free to selectively market to healthy groups by selling stripped down benefit packages that exclude benefits now required by states.”

noam.levey@latimes.com

@noamlevey

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