Still smarting from congressional Republicans' abject failure to repeal the Affordable Care Act by legislative means, President Trump now reportedly is plotting a backdoor attack aimed at gutting the act's most important consumer protections.
An executive order expected to be issued sometime this week would expand the ability of small businesses to band together and create "association health plans." On the surface, the idea looks like a means of offering employees of those businesses more options for health coverage; in reality, according to health reform experts, it would strip the ACA's consumer safeguards from those plans.
Combined with the administration's sabotage of other aspects of the Affordable Care Act, the new initiative aims to make the healthcare reform increasingly irrelevant to most of its beneficiaries, easing the path to outright repeal down the line. Former Medicare and Medicaid administrator Andy Slavitt calls this "synthetic repeal," and that it would "butcher the ACA beyond recognition."
The executive order, according to the Wall Street Journal, also would loosen the rules on short-term insurance policies. These plans traditionally were marketed to customers facing a short but predictable gap in coverage, say because of a break between jobs. Typically they offered limited benefits and could be purchased only for fewer than 365 days.
The ACA exempted them from such regulations as the requirement they cover 10 essential health benefits and the prohibitions against raising premiums or refusing coverage to people with medical conditions, but also restricted their terms to 90 days or fewer. (That provision went into effect this past April 1.) A Trump order allowing them again to be offered for up to a year would be the worst of all possible worlds, exposing their buyers to junk coverage for long periods of time.
Some insurance experts say short-term policies can be useful for some customers—those who are healthy and know they'll only need these plans for a short period. They're cheaper than regular insurance, because they don't offer the same benefits and can exclude pre-existing conditions.
But they can't be renewed, although customers may be able to buy another short-term policy from another company. Customers who get sick can expect to be thrown back in the Obamacare pool. And because these plans don't count as qualified insurance, their expiration doesn't allow a customer to sign up for Obamacare plans in mid-year. You could get sick or seriously injured, and have no coverage for as long as nine months. They're the essence of throwing the dice with your health. Finally, to the extent they lure healthy people out of the ACA exchanges, they make ACA insurance costlier for everyone else. That's bad healthcare policy.
The rule on association health plans, which are different, is the real threat, however, according to healthcare experts. "These new plans would be cherry picking machines," observes David Anderson of Duke University. "They would be seeking to only find very healthy individuals that they can medically underwrite" — that is, screen out all but the healthiest customers.
Association health plans enjoyed a minor vogue prior to the Affordable Care Act. By allowing small employers that were members of professional or trade groups to band together to offer employee health plans, they ostensibly gave those employers leverage to obtain favorable prices from insurers.
But the field was infected with all sorts of problems. Health insurance scamsters "have long used AHPs as a vehicle to sell fraudulent coverage to hundreds of thousands of unsuspecting consumers," Kevin Lucia and Sabrina Corlette of Georgetown University observed earlier this year. They also had an alarming tendency to go bankrupt without warning, sometimes leaving tens of thousands of customers uncovered at a stroke.
The ACA eliminated these risks by giving small employers access to insurance exchanges similar to the individual exchanges. Association plans were treated like small business plans, subject to the same consumer protection regulations as individual policies, including the mandate to cover essential benefits, the elimination of annual and lifetime benefit limits, and the requirement to charge people with pre-existing medical conditions the same premiums as healthy applicants.
The Trump executive order, however, would circumvent this arrangement by giving association plans the status of large-employer plans — which are exempt from many of those rules under the ACA. Large employers have their own incentives to offer standardized, comprehensive health plans to workers, including competition for talent and federal rules governing employee benefits, that don't apply to small businesses.
Fans of the association initiative assert that it would allow more sales of individual health plans across state lines, a Republican shibboleth that ostensibly would force premiums down by expanding competition. The truth is that this so-called "reform" makes no sense and has never been on the wish list of states, insurers or consumers. The Affordable Care Act, in fact, legalized cross-state insurance sales in states that enacted interstate compacts to allow them. Since the ACA became effective, 14 states have considered those compacts and three — Georgia, Kentucky and Maine — passed laws allowing interstate sales.
To date, not a single insurance company has taken advantage of this supposed boon. The reason is obvious: Setting up provider networks to serve customers outside one's home territory is immensely expensive, time-consuming, and a recipe for years of heavy losses. As a team from Georgetown reported in 2012, laws allowing cross-state health insurance sales have no organized champions. Consumers aren't clamoring for them; insurers aren't interested in them; doctors and hospitals don't care; and state regulators aren't inclined to cede their oversight to interlopers from somewhere else. Their only backers are political ideologues who don't understand health insurance and hope you don't, either.
Warnings about the folly of allowing association plans to operate under different rules from other health plans abound. The American Academy of Actuaries has warned that allowing such plans to follow the rules of a single state nationwide, or enjoy a pre-emption from federal regulations would undermine "the viability of many state-based markets."
Duke's Anderson questions whether Trump's association plans "would actually seek to provide healthcare. They are a regulatory arbitrage play and not a health finance play." Their goal, that is, would be to evade regulations.
Serious healthcare reformers won't view the Trump executive order as anything but another attempt at sabotaging the Affordable Care Act, papered over with the subterfuge that this is a pro-consumer move. In fact, it's another way to drive premiums higher for crummier health insurance.