Last week, the Trump administration took two steps that have injected major uncertainty about the continuation and cost of coverage offered through the Marketplaces.
On Thursday, President Trump signed an Executive Order (EO) instructing federal agencies to advance three policies that would make it easier for individuals to purchase insurance coverage that fails to meet Affordable Care Act (ACA) requirements around coverage and benefits. The EO proposes to:
- Allow small businesses and individuals working in the same field to form “associations” across state lines, through which they could purchase health plans that would likely be exempt from many state and federal requirements.
- Extend how long people can have short-term, bare-bones policies that don’t meet ACA requirements from the current three months to one year.
- Allow Health Reimbursement Accounts (like Health Savings Accounts, except that they’re funded directly by the employer) to cover expenses incurred under insurance plans that do not meet ACA requirements.
The EO indicates that both Association Health Plans (AHPs) and short-term plans will be able to avoid many ACA rules, including benefits requirements, limits on consumers’ yearly and lifetime costs, actuarial value rules, and the ban on charging more to customers who have been sick. AHPs might be entirely exempted from all state and federal regulation.
All three proposals would make it easier for younger and healthier individuals to buy less comprehensive insurance. By “siphoning” these persons off from the Marketplaces, they will leave sicker and more expensive persons in the Marketplaces — leading to higher premiums and fewer insurers offering plans.
As with many previous Executive Orders, many important policy details are unclear. Most of these details will be worked out by federal agencies, which will need to issue new regulations to implement them. As a result, none of the proposed options will be available in time for 2018.
In addition, late Thursday evening, the President announced that he will stop payments to ACA insurers for “cost-sharing reductions” (CSRs) – the reductions in copays and deductibles available to individuals with incomes between 101% and 250% of the Federal Poverty Level — referring to them as insurance company “bailouts.” While the long-term future of these payments has long been in question due to a lawsuit filed by House Republicans under the Obama administration, lawmakers on both sides of the aisle have urged the Trump administration to continue the subsidies in the short term to avoid major disruptions in the market.
Since insurers offering plans under the Marketplace are required to offer CSRs, even if they are not reimbursed by the federal government, it is expected that this move could cause many of these insurers to either try and raise premiums for 2018 even though they were to be locked in at the end of September, or exit the Marketplaces entirely. The Senate HELP committee has been working on efforts to restore the CSRs, but it is unclear when, or even if, these efforts will result in a legislative fix.
What is clear, though, is that both of these proposals will threaten the stability of the individual markets. While we will not know for some time what the eventual impact of the Executive Order will be, the decision to no longer fund CSRs will have an immediate impact, causing insurers to decide in the next several weeks whether or not to stay in the marketplaces. We’ll continue to watch these issues closely and provide updates as more information becomes available.