The President’s Executive Order: Less Than Meets The Eye?

http://healthaffairs.org/blog/2017/10/20/the-presidents-executive-order-less-than-meets-the-eye/

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The executive order (EO) signed by President Donald Trump on October 12 directs the Departments of Health and Human Services (HHS), Labor, and Treasury to develop federal regulations that could allow new and less expensive health insurance options for employers and consumers.

The EO marks a shift in the administration’s strategy on health care. After failing to get legislation through Congress to repeal and replace the Affordable Care Act (ACA), the administration is now attempting to move away from the ACA’s heavily-regulated markets through changes that can be implemented without a change in the law.

The executive order does not itself change any federal regulations. Instead, it sets into motion a policy development process that could lead to new regulations or regulatory guidance within the confines of current law. Although the EO gives general policy direction, the specific content of future regulations depends on legal and technical analysis to be conducted by the agencies.

The policy themes are familiar: expand access to lower-cost insurance outside of the ACA’s exchange mechanism and enhance the use of financing vehicles to help workers pay for their care. The extent of possible changes is limited. For example, the EO seeks to allow the sale of insurance across state lines, but relies on potentially expanding the ability of employers to form Association Health Plans (AHPs) under the Employee Retirement Income Security Act (ERISA). Individuals purchasing their own insurance would continue to be subject to federal and state insurance market rules.

An Uncertain And Potentially Lengthy Timeline

The timeline for producing rule changes is uncertain. The EO gives the agencies 60 days to “consider proposing regulations or revising guidance” without specifying the date when a proposed rule would be released. It typically takes months, and sometimes years, to put a new federal regulation into effect.

The Administrative Procedures Act specifies that agencies must follow an open public process when they issue regulations. Following an often-lengthy internal clearance process, a proposed rule is issued that invites public comments. The final rule taking those comments into consideration must be developed and cleared before publication. Less time is required if an agency determines that it can issue an interim final rule without first publishing a proposed rule. Interim final rules generally take effect immediately.

Even if the federal agencies move expeditiously, it is unlikely that new regulations could affect the marketplace for health insurance in 2018. ACA exchange plans have been finalized in time for this year’s open enrollment period, starting November 1. Most employers will have signed contracts for their insurance plans for next year well before the end of 2017 as well. Most Americans will be required to select next year’s coverage before the end of this year. Realistically, any new rules are likely to be effective starting in 2019 or later.

Major Policy Areas

The EO targets three policy areas for change.

Association Health Plans (AHPs)

Republicans have long supported the use of AHPs to give small employers some of the advantages that large employers have in purchasing insurance for their workers. AHPs potentially could allow small firms to operate as one large employer plan, giving them scale economies and greater market power than they have purchasing insurance as separate companies. In addition, AHPs could be exempted from some of the ACA’s requirements (including essential health benefits and community-rated premiums). However, as the law is now interpreted, AHPs are subject to the same state and federal regulations that apply to the small group and individual insurance markets, largely eliminating their usefulness.

The EO directs the Labor Department, which oversees the regulation of employer plans, to look for ways to make it easier for small businesses to join AHPs. The existing rules for multi-employer insurance plans are complex, but it may be possible that ERISA could be reinterpreted to make AHPs more effective and attractive than they are today. The EO raises the possibility that AHPs could be formed among employers operating in the same geographic area or industry. Details may not be available for some time.

Whatever changes are pursued will be heavily scrutinized and likely challenged in court. Insurers selling in ACA-regulated markets might oppose the new regulations if they expect AHPs to attract healthier individuals from more comprehensive (and more expensive) exchange plans.

It is not clear that AHPs would be a better option for small employers than they have today. Forming larger groups can help spread insurance risk and administrative costs. Larger plans can also use their leverage to push better managed care protocols into their insurance plans, and thus cut costs. However, the voluntary nature of AHPs could result in plans competing for healthier groups of workers rather than investing the resources necessary to make health care more efficient and effective.

Small employers may have the option of joining more than one AHP or staying in the regulated market. Competing AHPs might structure their coverage to attract firms with younger, healthier workers. The press statement accompanying the EO states that employers would not be allowed to discriminate among workers based on their health status. But small employers would not be forced to join AHPs, and the rules for joining might be written in ways that implicitly and subtly target firms with healthier workers.

AHPs could add value to the health system if they moved people out of expensive, unmanaged fee-for-service insurance with high administrative costs into better-run managed care plans that cut expenses through economies of scale and elimination of unnecessary use of services. The Trump administration might find a way within current law to make these kinds of AHPs available without shifting higher premiums onto less healthy workers. But the history of AHPs and related types of organizations is not promising. Many previous multi-employer plans have suffered from undercapitalization, and have gone insolvent. It will not be easy to secure the necessary capital to build a viable AHP in a market in which small employers may have several insurance options.

Short-Term, Limited Duration Insurance (STLDI)

Short-term health insurance policies offer coverage to individuals who are unable to obtain other forms of health insurance but want to be protected for a specific period of time. STDLI plans are not subject to the ACA’s insurance rules. They do not have to cover the ACA’s essential health benefits, they do not cover pre-existing conditions, and they are not required to cover people in poor health. One study found that STDLI plans are one-third the price of exchange plans. These plans have generally been viewed as niche products, sold primarily to people who are between jobs.

The EO calls on HHS, Labor, and Treasury to reverse decisions of the Obama administration that restricted the availability of STLDI plans. A regulation issued on October 31, 2016 limits their duration to no more than three months, and the plans are not renewable. Moreover, enrollment in an STLDI plan does not constitute coverage under the ACA’s individual mandate. It seems likely that the agencies have the authority under current law to allow STLDI plans to cover an individual for up to one year and to be renewable.

STLDI plans are clearly not for everyone but could prove attractive to some customers. Low-cost coverage should be made available to individuals who change jobs and those who are unable to buy exchange coverage after the open season has ended. Consumers enrolled in STLDI plans who develop a serious medical condition would probably not be able to renew their coverage but would have access to higher-premium plans offered on the ACA-regulated marketplace.

An open question is whether the Trump administration will also attempt to exempt STLDI enrollees from the individual mandate’s tax penalties. That would make short-term plans more attractive for healthy people and thus exacerbate the adverse selection that is already driving up premiums for ACA-compliant plans.

Health Reimbursement Arrangements (HRAs)

HRAs allow employers to reimburse workers for their families’ medical expenses, including deductibles and other cost-sharing payments and health items not covered by insurance. Unlike health savings accounts, workers do not contribute to HRAs. Payments made by an employer through an HRA are not treated as taxable income for the worker. The Obama administration required HRAs to be used solely in conjunction with ACA-compliant health plans.

The EO directs the agencies to propose ways to expand the availability and use of HRAs. The EO specifically states an intention to allow HRAs to be used for workers purchasing their own non-group coverage. The administration may be planning to allow HRA funds to be used to pay premiums and cost-sharing in the individual insurance market, including plans that are not ACA-compliant. Those plans might include AHP plans and STDLI, depending on other regulatory changes that might result from the EO.

For some small employers, an expanded role for HRAs may be an attractive way to help pay insurance premiums for their workers without sponsoring an insurance plan themselves. But it is far from clear how much authority there is under current law to make this kind of change. Moreover, even if the administration were able to create a larger role for HRAs, workers in small firms may not be eager to get their insurance through the ACA exchanges instead of through their place of work.

Premature Predictions

Several commentators have said that the Trump administration’s EO would result in risk segmentation that would drive up premiums and could eventually lead to dismantling the ACA exchanges. That prediction seems premature. AHPs as they exist today do not pose a threat to the ACA. It remains to be seen if the administration can make room for a viable AHP option, and whether or not that option will adversely affect the ACA exchanges. The STLDI plans are a niche market today. While it is possible their role could expand, their value is limited and attractive to only a small segment of the market. The administration’s vision for HRAs is not clear enough to predict how any changes would affect the existing ACA markets.

Each of the changes contemplated by the Trump EO would take time to put into effect. Once the rules are changed, the private sector would need to make investments to change their business practices. It is doubtful there would be a rapid transition.

Millions of consumers are enrolled in ACA-compliant plans today. The ACA exchanges face an elevated level of adverse selection. But those markets remain the only real game in town primarily because the ACA’s generous premium subsidies are only available through the exchanges. The President’s EO cannot change this reality. Whatever is done in response to the EO is likely to have a less dramatic effect on the market than some in the administration now hope, and others now fear.

 

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.

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.

Trump healthcare order could run afoul of retirement plan law

http://www.reuters.com/article/us-usa-healthcare-lawsuits-analysis/trump-healthcare-order-could-run-afoul-of-retirement-plan-law-idUSKBN1CH0DR

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President Donald Trump’s plan to make it easier for small businesses to band together and buy stripped-down health insurance plans could violate a federal law governing employee benefit plans and will almost certainly be challenged in court, legal experts said.

U.S. President Donald Trump speaks about tax reform in Harrisburg, Pennsylvania, U.S., October 11, 2017. REUTERS/Joshua Roberts

Trump signed an executive order on Thursday aimed at letting small businesses join nationwide associations for the purpose of buying large-group health plans that are not subject to coverage requirements of the Affordable Care Act, commonly known as Obamacare.

Industry experts said Trump’s order could ultimately enable such associations to purchase insurance from states with the fewest regulations. That would undermine Obamacare, former Democratic President Barack Obama’s signature healthcare law, which Republicans have failed to repeal.

Several healthcare and employment law experts said if Trump’s plan moves forward, states could argue the federal government had overstepped its authority in violation of the U.S. Employee Retirement Income Security Act (ERISA), a law that governs large-group plans.

In Thursday’s order, Trump asked the Department of Labor to propose rules that would allow more employers to participate in association health plans. Legal experts said lawsuits might not be brought until such regulations are issued.

Dania Palanker, an assistant research professor at Georgetown University’s Center on Health Insurance Reforms, said ERISA granted states the right to regulate association health plans.

Attorneys general could argue the federal government had overreached if the Trump administration winds up allowing associations to buy health coverage across borders that only complies with a single state’s regulations.

”Any attempt to allow the sale of association plans to small groups across state lines will be open to legal scrutiny as to whether it is violating ERISA and undermining state authority,” said Palanker.

‘PREPARED TO FIGHT’

A White House official said that “departments will be drafting rules in a way that minimizes litigation risk.”

The Department of Labor “will be reviewing ERISA in the course of following the President’s direction” in the order, the official said.

A number of state attorneys general from Democratic-leaning states said on Thursday they would fight any efforts to weaken Obamacare, which extended health insurance to 20 million Americans, but which Republicans call intrusive and ineffective.

“It should come as no surprise that California is prepared to fight in court to protect affordable healthcare for its people,” said Xavier Becerra, the state’s Democratic attorney general.

Legal experts said states may argue the associations formed for the purpose of buying insurance are not employers under ERISA.

Although ERISA allows associations to qualify as employers and manage large-group plans, federal regulators have generally required that members of such associations have a high degree of common interest beyond buying insurance, said Allison Hoffman, a professor at the University of Pennsylvania School of Law.

Trump’s order asks the secretary of labor, who enforces ERISA, to consider expanding the common-interest requirements to permit broader participation in association health plans.

SHORT-TERM PLANS

The idea of expanding association health plans across state lines has long been championed by Republican U.S. Senator Rand Paul, who made it a key plank of his own proposal to repeal and replace Obamacare. The Kentucky Republican was at Trump’s side when the president signed the executive order.

Paul’s proposal said ERISA was too restrictive in its definition of associations and that the law needed to be amended.

Thursday’s order also asked the Labor, Treasury and Health and Human Services Departments to look into expanding participation in cheaper, bare-bones, short-term limited-duration insurance plans, which are not subject to the ACA.

Timothy Jost, a professor at the Washington and Lee University School of Law, said such a move would face fewer legal hurdles than the expansion of association health plans.

The current three-month limitation on the use of such plans was a rule adopted by the Obama administration last year, so the Trump administration could roll it back through the normal rulemaking process.

Such plans are typically marketed to individuals who are between jobs or have a gap in coverage. They are much cheaper than ACA plans, but cover less and can exclude those with pre-existing conditions.