ACA Waiver Changes

https://theincidentaleconomist.com/wordpress/waiver-changes/

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In broad strokes, the bipartisan deal from Senators Alexander and Murray would restore cost-sharing payments through 2019 in exchange for some amendments to the rules governing ACA waivers. Now that we have the bill text, we can start to wrap our hands around the practical effects of those waiver changes.

Most importantly, the bill would relax one of the guardrails governing state waivers. In its current form, section 1332 of the ACA requires any waiver to include cost-sharing protections that are “at least as affordable” as those in the ACA. Under the new bill, the waiver would just have to provide “cost sharing protections against excessive out-of-pocket spending that are of comparable affordability, including for low-income individuals with serious health needs, and other vulnerable populations.”

To my eyes, that’s a pretty modest change. The category of waivers with cost-sharing protections that are “of comparative affordability” to those in the ACA, but are not “at least as affordable,” is tiny. The new language may signal that HHS could approve waivers where the states would offer protections are slightly less robust than what we’ve already got under the ACA. But that’s it.

There’s been some talk that the language change might allow the approval of Iowa’s waiver. I don’t see it. As I understand it, Iowa wants to undo cost-sharing protections for its residents.* [See the update below; Iowa’s position has softened from its original waiver proposal.] How is an absence of cost-sharing protections the same as “cost sharing protections … that are of comparable affordability” to those in the ACA? I’ve explained before that the decision to grant a waiver can be challenged in court. If Iowa’s waiver wasn’t viable before, it won’t be viable even if the Alexander-Murray bill becomes law.

Apart from the guardrail change, the bill would require HHS to decide on waivers within 90 days, not 180 days, which should speed processing. Of particular relevance to Iowa’s waiver, the bill also creates an expedited approval pathway of 45 days for “urgent situations.”

What’s an urgent situation? It’s one where the Secretary determines that all or part of a State is “at risk for excessive premium increases or having no health plans offered.” But there’s less than meets the eye here. An urgent waiver isn’t automatically granted when that time has elapsed: the Secretary still has to approve an urgent waiver before it can take effect. The default is still “no.”

Of perhaps greater significance, the bill would prohibit HHS from yanking a state waiver for six years “unless the Secretary determines that the State materially failed to comply with the terms and conditions of the waiver.” That last clause means that, if a state’s waiver is approved, the next Secretary of HHS can’t terminate the waiver—even if it turns out that the waiver doesn’t comply with the guardrails.

It’s not hard to see how that change might make a difference if a Democrat takes office in 2020. Still, it’s a far cry from changes to the waiver rules in previous Republican bills, which would have outright prohibited HHS from terminating waivers for eight years, however recklessly or foolishly states spent their ACA money.

Finally, the legislation would undo HHS guidance and regulations pertaining to waivers. The Obama administration, for example, declined to allow states to package their 1332 waivers with Medicaid waivers, and use savings from one waiver to offset an increase in spending from the other. The field would be clear for the Trump administration could revisit that. Then again, the Trump administration could have revisited those Obama-era rules anyhow, so I can’t see why vacating the regulations and guidance makes much of a difference.

All in all, the changes to the waiver rules are real but minor. To borrow from Hamilton, it looks like Senator Murray got more than she gave, and wanted what she got.

* Update: David Anderson has pointed me to an October 5 revision that Iowa made to its waiver request that would extend cost-sharing protections to individuals up to 200% of the poverty line (the ACA affords protection up to 250%). With those protections in place, Iowa says that people up to 150% of poverty “will not see an increase in their out-of-pocket costs,” and that people between 150% and 200% of poverty will have a “lower average total cost of care,” taking into account premiums and out-of-pocket spending. Those in the 200% to 250% range won’t receive out-of-pocket protections.

Are Iowa’s revised cost-sharing protections comparably affordable to those under the ACA? The protections are certainly thinner, and for people in the 200% to 250% range, nonexistent. Whether that package as a whole is “comparable” is a question of degree: I can see an argument either way. Which is to say that the revised Iowa waiver might be approved under the new standard, but I wouldn’t be surprised to see a lawsuit over any such approval.

ACA Alterations Will Jolt Health Exchanges for 2018

http://www.healthleadersmedia.com/health-plans/aca-alterations-will-jolt-health-exchanges-2018?spMailingID=12171449&spUserID=MTY3ODg4NTg1MzQ4S0&spJobID=1261586415&spReportId=MTI2MTU4NjQxNQS2#

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The end of cost sharing reductions has insurers trying to raise premiums even higher than planned. Those high premiums and other changes to the Affordable Care Act may drive consumers away from the exchanges.

The loss of cost sharing reductions (CSR) and the presidential executive order altering the Affordable Care Act will combine to significantly shake up the insurance market for 2018, one analyst says.

The effect is likely to include raising rates so high that the number of healthcare consumers who do not purchase coverage will skyrocket.

Health plans are scrambling to raise their rates even higher than already planned, responding to President Donald Trump’s announcement that insurers will no longer receive the subsidies.

Insurers were forced to submit rates for next year while the fate of CSRs was still uncertain—one set of rates is for if the subsidies continued and the second is for a higher rate to be used if they did not.

Some insurers are asking for a chance to revise the rates already submitted, says Julius W. Hobson Jr., an attorney and healthcare analyst with the Polsinelli law firm in Washington, D.C.

The CSR termination comes right after President Trump issued a new executive order he says is designed to increase competition and choice. Critics say it would seriously weaken the ACA, and some say that’s intentional.

President Trump says the order will give millions of Americans more access to affordable coverage and make it easier for people to obtain large-group coverage. Others worry that it could lure healthy young Americans away from the ACA exchanges, leaving those who remain to pay higher premiums.

“The combination of the executive order and the CSR termination wreaks havoc on the health insurance market for all of 2018,” Hobson says. “This also comes just before the open enrollment and with cutting back money for the patient navigators who help people sign up, and with reduced access to the website. That all means there are going to be fewer people who sign up.”

Higher premiums and deductibles already were driving some consumers away from purchasing individual healthcare plans, Hobson notes, and more will follow when the CSR loss forces insurers to raise rates even higher.

If the Trump administration stops enforcing the individual mandate, as it has said it might, that would make even more consumers forgo coverage, he says.

Fewer consumers buying insurance on the ACA exchanges intensifies their existing problems, Hobson says.

Premiums and deductibles will continue to rise as insurers struggle to remain profitable with a smaller pool of older, sicker patients driving high utilization costs. More and more consumers will leave the exchanges if they can, he says.

“People are going to be looking at premium increases they just can’t afford,” Hobson says. “The individual market will take a big hit, but the impact on the group market is harder to predict. We don’t know yet whether the increases in the individual market will bleed over into the group market.”

The recent changes are intended to weaken the ACA, Hobson says.

“The administration has said the ACA is imploding, but also that they’re going to do everything they can to wreck it. It’s not imploding on its own, it’s being shoved down the trash chute,” Hobson says.

“Losing the CSR payments is critical and, at this point, it’s unlikely that even if Congress acted they could do anything in time to affect 2018. There’s no way of looking at this other than it having a negative outcome,” he says.

Trump Flip-Flops on Senate Health Care Deal

http://www.rollcall.com/news/politics/trump-wont-sign-alexander-murray-health-care-deal?utm_source=rollcallafternoon&utm_medium=email&utm_campaign=newsletters&utm_source=rollcallafternoon&utm_medium=email&utm_campaign=newsletters

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President opposes bipartisan deal he supported the day before.

President Donald Trump reversed gears on a bipartisan Senate health care deal Wednesday, saying he would not sign the pact reached by Sens. Lamar Alexander and Patty Murray less than 24 hours after he signaled support for it in a public appearance in the Rose Garden.

Trump “supports the process” of trying to find a short-term fix to the 2010 health care law, but he “doesn’t support the result,” a White House official said of the efforts by the chairman and ranking member of the Senate Health, Education, Labor and Pensions Committee.

The opposition comes just after Trump tweeted Wednesday morning he could not “support bailing out ins co’s who have made a fortune w/ O’Care.”

That came after Trump said in a speech to the Heritage Foundation Tuesday that he opposed continuing cost-sharing subsidy payments that help low-income people pay for health insurance on the exchange, the crux of the Alexander-Murray deal and something state insurance officials and insurance companies say is essential to the markets not collapsing. Trump last week said he would end the administration’s practice of making those payments.

That move has not resonated with the public. Fifty-three percent of respondents to an Economist/YouGov survey conducted Oct. 15 and 16 said they disapproved of the executive move, compared to 31 percent who were in favor. Sixteen percent declined to give an opinion.

“While I commend the bipartisan work done by Senators Alexander and Murray — and I do commend it — I continue to believe Congress must find a solution to the Obamacare mess instead of providing bailouts to insurance companies,” Trump said.

That speech came just a few hours after he said in the Rose Garden that administration officials have been involved in the Alexander-Murray talks and signaled he supported what he described as a one- or two-year package.

In that White House appearance, Trump called the Alexander-Murray move a “short-term deal” that is needed to “get us over this hump” until Republicans might find a way to send him a measure to partially or completely repeal the Obama-era law.

During a HELP Committee hearing that wrapped up just after Trump’s tweet Wednesday, Alexander said he and Murray, along with several co-sponsors, would present the plan on the Senate floor.

Murray ruled out major changes to the plan after Trump’s newfound position.

“This is our bipartisan agreement. We’ve agreed on it, and it’s a good compromise, both of us had to give and that’s what we have,” the Washington Democrat said.

Alexander said the president had encouraged senators to keep working toward a deal.

“The president called me this morning, which is the third time he’s called me about this. I appreciate his encouragement of the process,” the Tennessee Republican said. “He asked me to do it, to work with Sen. Murray on the project. He said he would review the legislation, which is what I would expect a president to do. So we will keep working on it.”

Alexander said Tuesday he briefed Senate Republicans on the temporary plan that would provide funding through 2019 for cost-sharing reduction subsidies that help lower-income consumers. It would also give states more flexibility to seek waivers to bypass the law under certain conditions.

Requirements for certain health benefits and banning insurers from charging more would stay in place, Alexander said.

House Speaker Paul D. Ryan’s position remains that the Senate should focus on repeal and replace efforts, a spokesman said.

Trump Acting Solo: What You Need To Know About Changes To The Health Law

Trump Acting Solo: What You Need To Know About Changes To The Health Law

Apparently frustrated by Congress’ inability to “repeal and replace” the Affordable Care Act, President Donald Trump this week decided to take matters into his own hands.

Late Thursday evening, the White House announced it would cease key payments to insurers. Earlier on Thursday, Trump signed an executive order aimed at giving people who buy their own insurance easier access to different types of health plans that were limited under the ACA rules set by the Obama administration.

“This is promoting health care choice and competition all across the United States,” Trump said at the signing ceremony. “This is going to be something that millions and millions of people will be signing up for, and they’re going to be very happy.”

The subsidy payments, known as “cost-sharing reductions,” are payments to insurers to reimburse them for discounts they give policyholders with incomes under 250 percent of the federal poverty line, or about $30,000 in income a year for an individual. Those discounts shield these lower-income customers from out-of-pocket expenses, such as deductibles or copayments. These subsidies have been the subject of a lawsuit that is ongoing.

The cost-sharing reductions are separate from the tax credit subsidies that help millions of people pay their premiums. Those are not affected by Trump’s decision.

Some of Trump’s actions could have an immediate effect on the enrollment for 2018 ACA coverage that starts Nov. 1. Here are five things you should know.

1. The executive order does not make any immediate changes.

Technically, Trump ordered the departments of Labor, Health and Human Services and Treasury within 60 days to “consider proposing regulations or revising guidance, to the extent permitted by law,” on several different options for expanding the types of plans individuals and small businesses could purchase. Among his suggestions to the department are broadening rules to allow more small employers and other groups to form what are known as “association health plans” and to sell low-cost, short-term insurance. There is no guarantee, however, that any of these plans will be forthcoming. In any case, the process to make them available could take months.

2. The cost-sharing reduction changes ARE immediate but might not affect the people you expect.

Cutting off payments to insurers for the out-of-pocket discounts they provide to moderate-income policyholders does not mean those people will no longer get help. The law, and insurance company contracts with the federal government, require those discounts be granted.

That means insurance companies will have to figure out how to recover the money they were promised. They could raise premiums (and many are raising them already). For the majority of people who get the separate subsidies to help pay their premiums, those increases will be borne by the federal government. Those who will be hit hardest are the roughly 7.5 million people who buy their own individual insurance but earn too much to get federal premium help.

Insurers could also simply drop out of the ACA entirely. That would affect everyone in the individual market and could leave some counties with no insurer for next year. Insurers could also sue the government, and most experts think they would eventually win.

3. This could affect your insurance choices for next year. But it’s complicated.

The impact on your plan choices and premiums for next year will vary by state and insurer. For one thing, insurers have a loophole that allows them to get out of the contracts for 2018, given the change in federal payments. So, some might decide to bail. That could leave areas with fewer — or no — insurers. The Congressional Budget Office in August estimated that stopping the payments would leave about 5 percent of people who purchase their own coverage through the ACA marketplaces with no insurers in 2018.

For everyone else, the move would result in higher premiums, the CBO said, adding an average of about 20 percent. In some states, regulators have already allowed insurers to price those increases into their 2018 rates in anticipation that the payments would be halted by the Trump administration.

But how those increases are applied varies. In California, Idaho, Louisiana, Pennsylvania and South Carolina, for example, regulators had insurers load the costs only onto one type of plan: silver-level coverage. That’s because most people who buy silver plans also get a subsidy from the federal government to help pay their premium, and those subsidies rise along with the cost of a silver plan.

Consumers getting a premium subsidy, however, won’t see much increase in their out-of-pocket payments for the coverage. Consumers without premium subsidies will bear the additional costs if they stay in a silver plan. In those states, consumers may find a better deal in a different metal-band of insurance, including higher-level gold plans. Many states, however, allowed insurers to spread the expected increase across all levels of plans.

4. Congress could act.

Bipartisan negotiations have been renewed between Sens. Lamar Alexander (R-Tenn.) and Patty Murray (D-Wash.) to create legislation that would continue the cost-sharing subsidies and give states more flexibility to develop and sell less generous health care plans than those currently offered on the exchanges. Trump’s move to end the cost-sharing subsidies may bolster those discussions.

In a statement, Murray called Trump’s action to withdraw cost-sharing subsidies “reckless” but said she continues “to be optimistic about our negotiations and believe we can reach a deal quickly — and I urge Republican leaders in Congress to do the right thing for families this time by supporting our work.”

Trump on Friday urged Democrats to work with him to “make a deal” on health care. “Now, if the Democrats were smart, what they’d do is come and negotiate something where people could really get the kind of healthcare that they deserve, being citizens of our great country,” he said Friday afternoon.

Earlier Friday, Senate Minority Leader Chuck Schumer (D-N.Y.) did not sound as if he was in the mood to cut a deal.

“Republicans have been doing everything they can for the last ten months to inject instability into our health care system and to force collapse through sabotage,” he said in a statement. “Republicans in the House and Senate now own the health care system in this country from top to bottom, and their destructive actions, and the actions of the president, are going to fall on their backs. The American people see it, and they know full well which party is doing it.”

poll released Friday by the Kaiser Family Foundation shows that 71 percent of the public said they preferred that the Trump administration try to make the law work rather than to hasten replacement by encouraging its failure. The poll was conducted before Trump made his announcement about the subsidies. (Kaiser Health News is an editorially independent program of the foundation.)

5. Some states are suing, but the outcome is hard to guess.

Even though all states regulate their own insurance markets, states have limited options for dealing with Trump’s latest move. Eighteen states and the District of Columbia, led by New York and California, are suing the Trump administration to defend the cost-sharing subsidies. But it is unclear whether a federal court could say that the Trump administration is obligated to continue making the payments while that case is pending.

 

No rush to stabilize ACA markets

 

President Trump’s decision to cut off the Affordable Care Act’s cost-sharing reduction subsidies doesn’t seem to have added much new urgency to the push to stabilize states’ insurance markets — which would likely include a guarantee to keep the subsidy payments flowing.

  • Bad sign: GOP Senate leadership didn’t talk about the CSR issue at all last night in their weekly meeting, at least while staff was in the room, a senior aide told Axios’ Caitlin Owens. To them, it’s still all about tax reform.
  • “They’re focused on tax reform,” Alexander, who’s been spearheading the stabilization effort, said of GOP leaders. “What I’ve asked the Republican leadership to do is to give us a chance to see if we can develop consensus among Republicans as well as Democrats.”
  • “The sooner the better,” Alexander said. “We want whatever agreement we have to benefit people in 2018 by holding down increasing premiums and to lower them in 2019.”

Yes, but: Affecting 2018 premiums will be a tough task — the window to begin signing up for 2018 coverage begins in two weeks.

  • Pennsylvania regulators announced yesterday that they’ve approved new premium hikes, more than 20% higher than the increases that were already on the books, because of the loss of CSR subsidies.
  • If Congress reaches a deal in time, one senior GOP aide told Caitlin, states and insurers could look to options such as rate re-filings and rebates to help consumers next year.
  • But the Kaiser Family Foundation’s Larry Levitt said turbulence for 2018 will likely be minimal. Most insurers had already planned for the payments to end, and therefore don’t need to make any changes.
  • The Trump administration appears to be allowing new increases by insurers that didn’t plan for CSR payments to disappear, Levitt said.
  • “Terminating the CSR payments is producing a lot of confusion, but the market will operate reasonably fine and the effect on consumers will be modest,” Levitt said. “If this was intended to end Obamacare, it’s probably not going to work. The real question at this point is the longer term effect of the administration’s overall strategy to undermine the marketplaces.”
One more problem: Even if a deal is struck, and it could muster 60 votes in the Senate, there’s a very real question of how it passes. Voting on the bill by itself, without being part of a larger package, would be difficult for Republicans. Most legislation that needs to get passed before the end of the year is expected to be clumped into one big bill in early December.

Tough decisions loom for Dems on ObamaCare

http://thehill.com/policy/healthcare/355754-tough-decisions-loom-for-dems-on-obamacare

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Congressional Democrats have to decide how badly they want an ObamaCare deal.

Senate Republicans are open to renewing the insurer payments that President Trump canceled last week, but, in return, they want to expand a program that allows states to waive Affordable Care Act regulations.

That asking price could be hard for Democrats to swallow.

While Democrats want to protect ObamaCare, they fear that expanding the waivers would allow states to chip away at the bedrock protections of the law, including the rules on what an insurance plan must cover.

The politics of the health-care debate are also shifting.

While ObamaCare used to be a liability for Democrats, a Kaiser Family Foundation poll in August found that 60 percent of respondents think Republicans are responsible for problems in the Affordable Care Act going forward. Only 28 percent said the responsibility rests with Democrats.

Polls like that make some Republicans nervous about an ObamaCare backlash in the 2018 elections. And Democrats, hopeful of winning back the House and potentially even the Senate next year, are eager to hang ObamaCare’s problems around the GOP’s neck.

“Republicans in the House and Senate now own the health-care system in this country from top to bottom, and their destructive actions, and the actions of the president, are going to fall on their backs,” Senate Minority Leader Charles Schumer (D-N.Y.) said on Friday.

Negotiations over an ObamaCare bill have been going on for weeks, with Sens. Lamar Alexander (R-Tenn.) and Patty Murray (D-Wash.) seeking an agreement to stabilize the markets and protect people’s coverage options.

Democrats say they are pushing for a deal, and Murray said Friday she was “optimistic” that one could be reached.

Trump’s decision to cancel the payments to insurers added fresh urgency to the talks. Health-care experts warn the loss of the payments — meant to offset the cost of insuring some lower-income people — could cause insurers to flee the system before open enrollment begins Nov. 1.

Several Republicans have said they are worried their constituents will be hurt by a collapse of the marketplaces, seemingly bolstering the talks.

But it’s far from clear that any ObamaCare deal reached by the Senate can become law.

Speaker Paul Ryan (R-Wis.) said last month that an Alexander-Murray deal is “not viable” for the House GOP.

And Trump on Monday sent mixed signals about whether he’d be willing to sign a bill reviving the ObamaCare payments.

The president declared that ObamaCare is “dead” and boasted that he had ended the “gravy train” of payments to insurers, causing their stock prices to drop.

“Hundreds of millions of dollars a month handed to the insurance companies for very little reason, believe me. I want the money to go to the people. … I want the money to go to people that need proper health care, not to insurance companies, which is where it’s going as of last week. I ended that,” he said.

Yet Trump also seemed to endorse the Alexander-Murray talks, stating that the two parties are “meeting right now and right now they’re working on something very special.”

“I do believe we’ll have a short-term fix because I think the Democrats will be blamed for the mess. This is an ObamaCare mess,” he said.

Sen. Lindsey Graham (R-S.C.), who golfed with Trump over the weekend, said on CBS on Sunday that Trump had spoken with Alexander and that Trump is open to a deal to continue the cost-sharing reduction payments if there is enough flexibility for the states.

“We are willing to work with Congress  to reach a legislative solution,” a White House aide said. “We will not provide bailouts to insurance companies until we provide the American people with relief from the ObamaCare disaster.”

Schumer said  on Monday in a written statement that he welcomes Trump’s support for a deal.

“I’m hopeful that we are nearing an agreement that makes clear that we have no intention of supporting the president’s efforts at sabotage,” he said. “If he’s now supportive of an agreement that stabilizes and improves the existing system under the Affordable Care Act, we certainly welcome that change of heart.”

The negotiations have been hung up on the question of how far to go in waiving ObamaCare’s regulations.

Republicans say it is not enough to speed up the process for a state to get a waiver; instead, the scope of the waivers must be broadened.

Alexander says he has agreed to fund two years of the ObamaCare payments, known as cost-sharing reductions, which is more than his original offer of one year. He says Democrats need to give up something in return.

Democrats argue that they have already made significant concessions, including agreeing to expand low-cost “copper” health insurance plans, streamlining the waiver process by letting states choose from a “menu” of options and allowing insurers to charge higher out-of-pocket costs for some services.

Asked Monday if he wanted more flexibility for states than Democrats are willing to give, Alexander replied, “I want as much as we can get.”

“I mean, I would like to repeal and replace ObamaCare, and Sen. Murray would like to keep it intact, but that’s not how you make a compromise,” he said.

Alexander said Trump has encouraged him to make a deal, as has Schumer.

“I find that very encouraging, that both the president and Sen. Schumer encouraged me to do something,” Alexander said.

Still, he declined to put any timetable on when an agreement could be reached.

States have already tried Trump’s health care order. It went badly.

https://www.brookings.edu/blog/up-front/2017/10/13/states-have-already-tried-trumps-health-care-order-it-went-badly/?utm_campaign=Brookings%20Brief&utm_source=hs_email&utm_medium=email&utm_content=57417795

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Even after Republicans in Congress failed three times to rid themselves of the Affordable Care Act, President Trump has proved that there is no shortage of ideas for how to disrupt the health-care system.

Like many appealing ideas, this one, proposed by Sen. Rand Paul (R-Ky.), has hidden land mines that are already well-mapped out based on previous failed attempts to enact them, even in Paul’s home state of Kentucky.The president signed an executive order Thursday that will allow small employers to join associations of small business — such as farm bureaus or chambers of commerce — that provide health coverage to their members. If such associations self-insure, existing law might enable them to avoid both state insurance regulations and the core of the ACA. Thus, a simple turn of the regulatory dials could free up a large portion of the most heavily regulated parts of the health-insurance market.

A version of these self-insured association health plans first became widespread in the 1980s, but they failed in droves because many were undercapitalized. More troubling, these earlier association plans had a history of becoming what the Labor Department termed “scam artists” and the Government Accountability Office reported were “bogus entities [that] have exploited employers and individuals seeking affordable coverage.” More than two dozen states reported in 1992 that these early association plans had committed “fraud, embezzlement or other criminal law” violations.

We might avoid such a fate by requiring groups to register and meet adequate solvency and consumer-protection standards. But that doesn’t solve the more ominous aspect of association health plans: market destabilization.

Because less-regulated association health plans compete with fully regulated markets, actuaries and regulators have long warned that association plans create an uneven playing field that can disrupt markets. People who don’t need to cover preexisting conditions or don’t want to pay community rates gravitate to the better deals offered by associations, leaving sicker people in the regulated markets. Naturally, regulated insurance prices increase as a result, sometimes causing a death spiral that crashes the market.

We could avoid such market disruption by making association health plans abide by the same regulations that govern individuals and small groups, but the whole point of Trump’s executive order is to sidestep existing regulations. The only other option for avoiding market disruption is to keep association plans separate from the regular market by ensuring that people cannot simply choose between association plans and regulated insurance based solely on their health status.That’s just what happened in Kentucky in the 1990s when it reformed its individual market but exempted association plans from the reforms. Enrollment with associations shot up, and most insurers selling in the regulated market pulled out. Within two years, the state repealed its reforms. Association health plans were only one part of Kentucky’s failed market reforms, but they are still a major reason why the so-called Kentucky disaster now serves as a lesson for other states to avoid similar measures.

Employer groups avoid this kind of adverse selection because people can’t just pick an employer simply to get the health insurance they want. But many association health plans allow just that. You don’t need to be a farmer to join the Farm Bureau, and business associations can be open to any person that files a Schedule C tax form. Some groups have such skimpy fig leaves for membership qualification that they are criticized as “air breather” associations — that is, the only commonality among their members is their dependency on oxygen.

Federal and state law attempts to avoid this by exempting associations from insurance regulations only if they are “bona fide,” meaning that obtaining insurance is not the reason people join them. But as regulators will tell you, that criterion is not easy to enforce, which is why the hot potato of association “bona fides” is regularly tossed back and forth among states, insurers and the Labor Department .

Despite this troubled history, association health plans have an important place in, and alongside, regulated health-insurance markets. Still, their history counsels caution in freely expanding that role. These plans should succeed based on delivering superior value rather than serving as a vehicle to cherry-pick regulations they do and don’t want to follow. For that to happen, association health plans need a set of carefully considered rules based on lessons from the past, rather than naive belief in a quick fix.