The only question is how much it will weaken the ACA and hurt insurers.
The messy saga of the Affordable Care Act just got even messier.
President Donald Trump on Thursday signed an executive order aiming to make it easier for Americans to buy skimpier and cheaper health insurance. The order isn’t as aggressive as it might have been in undermining the ACA, but that’s scant reassurance for insurers, who face an administration that seems actively hostile to a law it’s supposed to enforce.
The order aims to let association health plans — groups of small employers banding together to buy insurance — offer coverage throughout the U.S. Insurers consistently oppose selling health insurance across state lines because of varying regulations. If plans are permitted to cross state borders, then insurers fear a regulatory race to the bottom, where cheaper and less-comprehensive plans from states with lax rules would attract the healthiest patients, leaving insurers in more-regulated states with a sick and expensive group of enrollees.
Insurers like Anthem inc. have pruned back their participation in the ACA to states where they feel safe. This order could shake up even those stable markets where the ACA is doing relatively well.
Allowing insurance sales across state lines may not make much of a difference. Insurance plans need a network of health-care providers in places wherever they offer insurance, and that’s difficult to create from scratch in a new state. But anything that makes state markets less predictable is a negative for insurers.
Trump’s order has the potential to siphon young and healthy patients from the ACA’s individual insurance markets to less-regulated plans and to raise premiums for sicker Americans, even if everyone stays within state borders. It instructs federal agencies to work to expand access to cheaper insurance that skirts the ACA’s regulations, both through association plans as well as skimpy, short-term insurance plans. Tennessee, where people can already sign up for cheaper association plans, has one of the sickest ACA marketplace populations.
A number of questions remain. An outline of the order suggests access to looser association plans may be limited to employers. But if self-employed individuals can sign up — an option the administration says it’s still considering — then it will be far more damaging to the individual market.
It’s also unclear whether people who purchase cheap, short-term insurance will be able to skirt the ACA’s individual mandate. If they can, then those plans will likely be substantially more popular. And it’s unclear how much power states will have to regulate such plans.
But even in mild form, these efforts will damage an already fragile market over time. And the uncertainty about these questions will have insurers running scared for the foreseeable future as agencies work on rules. Little about this administration suggests it will push for options that will make the ACA more functional.
President Trump will end key payments to insurers selling ObamaCare plans, the White House announced late Thursday, marking Trump’s most aggressive move yet to dismantle the law after multiple GOP efforts to repeal and replace it failed this year.
The Trump administration has continued making the the disbursements to insurers, known as cost-sharing reduction payments, on a monthly basis. But Trump had consistently threatened to end the payments, which are worth an estimated $7 billion this year.
“Based on guidance from the Department of Justice, the Department of Health and Human Services has concluded that there is no appropriation for cost-sharing reduction payments to insurance companies under Obamacare. In light of this analysis, the Government cannot lawfully make the cost-sharing reduction payments,” the White House said in a statement late Thursday night.
The payments were created as part of the Affordable Care Act but were then the subject of a lawsuit by House Republicans during the Obama administration. A federal court ruled the payments were being made illegally, but the Obama administration appealed.
Congress could still decide to appropriate the payments, and there is bipartisan agreement that they should be made. But no action has been taken, and some Republicans are hesitant to vote for what they see as a bailout of ObamaCare.
“The bailout of insurance companies through these unlawful payments is yet another example of how the previous administration abused taxpayer dollars and skirted the law to prop up a broken system. Congress needs to repeal and replace the disastrous Obamacare law and provide real relief to the American people,” White House press secretary Sarah Huckabee Sanders said.
The administration’s decision is likely to lead to lawsuits. It also puts enormous pressure on lawmakers to reach a deal on funding the payments, adding yet another partisan battle to an already full calendar.
Senate Minority Leader Charles Schumer (D-N.Y.) and House Minority Leader Nancy Pelosi (D-Calif.) issued a joint statement calling the decision a “spiteful act of vast, pointless sabotage … now, millions of hard-working American families will suffer just because President Trump wants them to.”
Meanwhile, Speaker Paul Ryan (R-Wis.) praised the decision to end the Obama administration’s appeal of the subsidies.
“Today’s decision … preserves a monumental affirmation of Congress’s authority and the separation of powers,” Ryan said in a statement. “Obamacare has proven itself to be a fatally flawed law, and the House will continue to work with the Trump administration to provide the American people a better system.”
Cutting off the subsidies could throw the ObamaCare marketplace into chaos.
The Congressional Budget Office (CBO) said in August that about 1 million additional people would be uninsured in 2018 and insurance companies would raise premium prices by about 20 percent for ObamaCare plans if the payments were cut off.
The CBO also said halting the payments would increase the federal deficit by $194 billion through 2026, largely because federal assistance to buy ObamaCare plans rises when premiums do.
The payments help low-income people afford co-pays, deductibles and other out-of-pocket costs associated with health insurance policies. Insurers have called the payments critical, saying that without them, they would have to massively increase premiums or exit the individual market.
Many insurers have already priced their plans for the coming open enrollment period, which begins Nov. 1.
The leaders of Senate Health Committee have been working toward a bipartisan deal to fund the payments for two years in order to stabilize the markets in the short term.
But progress was halted when lawmakers tried to pass a last-ditch ObamaCare repeal bill from Sens. Lindsey Graham (R-S.C.) and Bill Cassidy (R-La.) last month, and the sides have still not reached an agreement.
The decision on the payments comes after Trump on Thursday signed an executive order aimed at loosening ObamaCare restrictions on insurance plans, which also could help destabilize the law.
President Trump will scrap subsidies to health insurance companies that help pay out-of-pocket costs of low-income people, the White House said late Thursday. His plans were disclosed hours after the president ordered potentially sweeping changes in the nation’s insurance system, including sales of cheaper policies with fewer benefits and fewer protections for consumers.
The twin hits to the Affordable Care Act could unravel President Barack Obama’s signature domestic achievement, sending insurance premiums soaring and insurance companies fleeing from the health law’s online marketplaces. After Republicans failed to repeal the health law in Congress, Mr. Trump appears determined to dismantle it on his own.
Without the subsidies, insurance markets could quickly unravel. Insurers have said they will need much higher premiums and may pull out of the insurance exchanges created under the Affordable Care Act if the subsidies were cut off. Known as cost-sharing reduction payments, the subsidies were expected to total $9 billion in the coming year and nearly $100 billion in the coming decade.
“The government cannot lawfully make the cost-sharing reduction payments,” the White House said in a statement.
It concluded that “Congress needs to repeal and replace the disastrous Obamacare law and provide real relief to the American people.”
In a joint statement, the top Democrats in Congress, Senator Chuck Schumer of New York and Representative Nancy Pelosi of California, said Mr. Trump had “apparently decided to punish the American people for his inability to improve our health care system.”
“It is a spiteful act of vast, pointless sabotage leveled at working families and the middle class in every corner of America,” they said. “Make no mistake about it, Trump will try to blame the Affordable Care Act, but this will fall on his back and he will pay the price for it.”
Lawmakers from both parties have urged the president to continue the payments. Mr. Trump had raised the possibility of eliminating the subsidies at a White House meeting with Republican senators several months ago. At the time, one senator told him that the Republican Party would effectively “own health care” as a political issue if the president did so.
“Cutting health care subsidies will mean more uninsured in my district,” Representative Ileana Ros-Lehtinen, Republican of Florida, wrote on Twitter late Thursday. She added that Mr. Trump “promised more access, affordable coverage. This does opposite.”
But Speaker Paul D. Ryan, Republican of Wisconsin, praised Mr. Trump’s decision and said the Obama administration had usurped the authority of Congress by paying the subsidies. “Under our Constitution,” Mr. Ryan said, “the power of the purse belongs to Congress, not the executive branch.”
The future of the payments has been in doubt because of a lawsuit filed in 2014 by House Republicans, who said the Obama administration was paying the subsidies illegally. Judge Rosemary M. Collyer of the United States District Court in Washington agreed, finding that Congress had never appropriated money for the cost-sharing subsidies.
The Obama administration appealed the ruling. The Trump administration has continued the payments from month to month, even though Mr. Trump has made clear that he detests the payments and sees them as a bailout for insurance companies.
This summer, a group of states, including New York and California, was allowed to intervene in the court case over the subsidies. The New York attorney general, Eric T. Schneiderman, said on Thursday night that the coalition of states “stands ready to sue” if Mr. Trump cut off the subsidies.
What the administration has done to weaken the health law.
Mr. Trump’s decision to stop the subsidy payments puts pressure on Congress to provide money for them in a spending bill.
Senator Lamar Alexander, Republican of Tennessee and the chairman of the Senate health committee, and Senator Patty Murray of Washington, the senior Democrat on the panel, have been trying to work out a bipartisan deal that would continue the subsidy payments while making it easier for states to obtain waivers from some requirements of the Affordable Care Act. White House officials have sent mixed signals about whether Mr. Trump was open to such a deal.
The decision to end subsidies came on the heels of Mr. Trump’s executive order, which he signed earlier Thursday.
With an 1,100-word directive to federal agencies, the president laid the groundwork for an expanding array of health insurance products, mainly less comprehensive plans offered through associations of small employers and greater use of short-term medical coverage.
It was the first time since efforts to repeal the landmark health law collapsed in Congress that Mr. Trump has set forth his vision of how to remake the nation’s health care system using the powers of the executive branch. It immediately touched off a debate over whether the move would fatally destabilize the Affordable Care Act marketplaces or add welcome options to consumers complaining of high premiums and not enough choice.
Most of the changes will not occur until federal agencies write and adopt regulations implementing them. The process, which includes a period for public comments, could take months. That means the order will probably not affect insurance coverage next year, but could lead to major changes in 2019.
“With these actions,” Mr. Trump said at a White House ceremony, “we are moving toward lower costs and more options in the health care market, and taking crucial steps toward saving the American people from the nightmare of Obamacare.”
“This is going to be something that millions and millions of people will be signing up for,” the president predicted, “and they’re going to be very happy.”
But many patients, doctors, hospital executives and state insurance regulators were not so happy. They said the changes envisioned by Mr. Trump could raise costs for sick people, increase sales of bare-bones insurance and add uncertainty to wobbly health insurance markets.
Chris Hansen, the president of the lobbying arm of the American Cancer Society, said the order “could leave millions of cancer patients and survivors unable to access meaningful coverage.”
In a statement from six physician groups, including the American Academy of Family Physicians, the doctors predicted that “allowing insurers to sell narrow, low-cost health plans likely will cause significant economic harm to women and older, sicker Americans who stand to face higher-cost and fewer insurance options.”
While many health insurers remained silent about the executive order, some voiced concern that it could destabilize the market. The Trump proposal “would draw younger and healthier people away from the exchanges and drive additional plans out of the market,” warned Ceci Connolly, the chief executive of the Alliance of Community Health Plans.
Administration officials said they had not yet decided which federal and state rules would apply to the new products. Without changing the law, they said, they can rewrite federal regulations so that more health plans would be exempt from some of its requirements.
The Affordable Care Act has expanded private insurance to millions of people through the creation of marketplaces, also known as exchanges, where people can purchase plans, in many cases using government subsidies to offset the cost. It also required that plans offered on the exchanges include a specific set of benefits, including hospital care, maternity care and mental health services, and it prohibited insurers from denying coverage to people with pre-existing medical conditions.
The executive order’s quickest effect on the marketplaces would be the potential expansion of short-term plans, which are exempt from Affordable Care Act requirements. Many health policy experts worry that if large numbers of healthy people move into such plans, it would drive up premiums for those left in Affordable Care Act plans because the risk pool would have sicker people.
“If the short-term plans are able to siphon off the healthiest people, then the more highly regulated marketplaces may not be sustainable,” said Larry Levitt, a senior vice president for the Kaiser Family Foundation. “These plans follow no rules.”
Mr. Trump’s order would also eventually make it easier for small businesses to band together and buy insurance through entities known as association health plans, which could be created by business and professional groups. A White House official said these health plans “could potentially allow American employers to form groups across state lines” — a goal championed by Mr. Trump and many other Republicans — allowing more options and the formation of larger risk pools.
Association plans have a troubled history. Because the plans were not subject to state regulations that required insurers to have adequate financial resources, some became insolvent, leaving people with unpaid medical bills. Some insurers were accused of fraud, telling customers that the plans were more comprehensive than they were and leaving them uncovered when consumers became seriously ill.
The White House said that a broader interpretation of federal law — the Employee Retirement Income Security Act of 1974 — “could potentially allow employers in the same line of business anywhere in the country to join together to offer health care coverage to their employees.”
The order won applause from potential sponsors of association health plans, including the National Federation of Independent Business, the National Restaurant Association, the U.S. Chamber of Commerce and Associated Builders and Contractors, a trade group for the construction industry.
The White House released a document saying that some consumer protections would remain in place for association plans. “Employers participating in an association health plan cannot exclude any employee from joining the plan and cannot develop premiums based on health conditions” of individual employees, according to the document. But state officials pointed out that an association health plan can set different rates for different employers, so that a company with older, sicker workers might have to pay much more than a firm with young, healthy employees.
“Two employers in an association can be charged very different rates, based on the medical claims filed by their employees,” said Mike Kreidler, the state insurance commissioner in Washington.
Mr. Trump’s order followed the pattern of previous policy shifts that originated with similar directives to agencies to come up with new rules.
Within hours of his inauguration in January, he ordered federal agencies to find ways to waive or defer provisions of the Affordable Care Act that might burden consumers, insurers or health care providers. In May, he directed officials to help employers with religious objections to the federal mandate for insurance coverage of contraception.
Both of those orders were followed up with specific, substantive regulations that rolled back Mr. Obama’s policies.
In battles over the Affordable Care Act this year, Mr. Trump and Senate Republicans said they wanted to give state officials vast new power to regulate insurance because state officials were wiser than federal officials and better understood local needs. But under Thursday’s order, the federal government could pre-empt many state insurance rules, a prospect that alarms state insurance regulators.
Another part of Mr. Trump’s order indicates that he may wish to crack down on the consolidation of doctors, hospitals and other health care providers, a trend that critics say has driven up costs for consumers. Mr. Trump said that administration officials, working with the Federal Trade Commission, should report to him within 180 days on federal and state policies that limit competition and choice in the health care industry.
Insurers have said the move will destabilize the individual market and increase premiums by at least 20 percent.
In a move insurers have long said would destabilize the individual market and increase premiums by at least 20 percent, the Department of Health and Human Services late Thursday ended cost-sharing reduction payments.
At least one state attorney general, AG Eric Schneiderman of New York, has said he would sue the decision. The court granted a request to continue funding for the subsidies, Schneiderman said.
California may also sue the administration over the decision.
“I am prepared to sue the #Trump Administration to protect #health subsidies, just as when we successfully intervened in #HousevPrice!” California AG Xavier Becerra tweeted Thursday night.
In May, Schneiderman and Becerra led a coalition of 18 attorneys general in intervening in House v. Price over the cost-sharing reduction payments.
The cost-sharing reductions payments will be discontinued immediately based on a legal opinion from Attorney General Jeff Sessions, said Acting HHS Secretary Eric Hargan and Centers for Medicare and Medicaid Services Administrator Seema Verma.
“It has been clear for many years that Obamacare is bad policy. It is also bad law,” HHS said. “The Obama Administration, unfortunately, went ahead and made CSR payments to insurance companies after requesting – but never ultimately receiving – an appropriation from Congress as required by law. In 2014, the House of Representatives was forced to sue the previous Administration to stop this unconstitutional executive action. In 2016, a federal court ruled that the Administration had circumvented the appropriations process, and was unlawfully using unappropriated money to fund reimbursements due to insurers. After a thorough legal review by HHS, Treasury, OMB, and an opinion from the Attorney General, we believe that the last Administration overstepped the legal boundaries drawn by our Constitution. Congress has not appropriated money for CSRs, and we will discontinue these payments immediately.”
Trump tweeted this morning, “The Democrats ObamaCare is imploding. Massive subsidy payments to their pet insurance companies has stopped. Dems should call me to fix!”
Insurers reached and America’s Health Insurance Plans did not have an immediate comment on the ending of the subsidies.
The move to end CSRs comes weeks before the start of open enrollment on Nov. 1, but many insurers had submitted rates reflecting the end of the subsidies that allowed them to offer lower-income consumers lower deductibles and out-of-pocket costs.
America’s Essential Hospitals said it was alarmed by news of administration decisions that could create turmoil across insurance markets and threaten healthcare coverage for millions.
“This decision could leave many individuals and families with no options at all for affordable coverage,” said Bruce Siegel, MD, CEO of America’s Essential Hospitals. “We call on Congress to immediately shore up the ACA marketplace and to work in bipartisan fashion, with hospitals and other stakeholders, toward long-term and sustainable ways to give all people access to affordable, comprehensive care.”
Today’s CSR decision follows yesterday’s executive order from President Trump to allow for association health plans that could circumvent Affordable Care Actmandates on coverage. The executive order must go through the federal rulemaking process and may also face legal challenges.
“Health plans remain committed to certain principles. We believe that all Americans should have access to affordable coverage and care, including those with pre-existing conditions. We believe that reforms must stabilize the individual market for lower costs, higher consumer satisfaction, and better health outcomes for everyone. And we believe that we cannot jeopardize the stability of other markets that provide coverage for hundreds of millions of Americans,” said spokeswoman Kristine Grow. “We will follow these principles – competition, choice, patient protections and market stability – as we evaluate the potential impact of this executive order and the rules that will follow. We look forward to engaging in the rulemaking process to help lower premiums and improve access for all Americans.”
The American Academy of Family Physicians and five other medical associations representing more than 560,000 doctors have expressed serious concerns over the effect of President Trump’s executive order directing federal agencies to write regulations allowing small employers to buy low-cost insurance that provides minimal benefits.
In a joint statement, the AAFP, the American Academy of Pediatrics, the American College of Physicians, the American Congress of Obstetricians and Gynecologists, the American Osteopathic Association and the American Psychiatric Association strongly rejected the order they said would allow insurers to discriminate against patients based on their health status, age or gender.
Republicans tried to repeal and replace the ACA, and since that failed are trying to end consumer protections under the law, according to U.S. Representative Bill Pascrell Jr., a Democrat from New Jersey and a member of the Ways and Means Committee.
“Republicans have been on the warpath trying to end important consumer protections that the ACA affords, including protections for people with pre-existing conditions and required coverage for services that people actually need, like mental health care,” Pascrell said. “Now that they’ve failed in that endeavor, the Trump Administration is trying to use the back-door with this executive order.”
A Congressional Budget Office analysis released in August said the CSRs, which cost an estimated $7 billion a year, could end up costing the federal government $194 billion over a decade.
Trump’s executive order will likely include a provision making it easier for employers to set aside some money, tax-free, to help their workers pay insurance premiums. This one hasn’t gotten as much attention yet as some of the other policies Trump is expected to pursue, but it’s a big deal — one insurers fear could push more people into a shaky market.
The details: Employers already can set aside some pre-tax dollars to help cover employees’ health care costs. Trump’s executive order will likely expand those programs so that they can be used to help employees cover the premiums for an individual insurance policy, an insurance industry official told me.
The reactions:
Insurers are afraid this will give employers an incentive to stop offering traditional health benefits: Why go to all the trouble of finding and offering a health care plan if you can just offer your workers some money to go buy their own?
“That would be survivable, I think,” if the individual market were more stable, the official said. But because that market is shaky, insurers are nervous.
Another fear: Employers might be able to offer coverage to their younger employees, while using these new funds to shift older workers, who tend to have higher health care costs, into the individual market.
The unknowns: Dumping workers into the individual market, even with help paying their premiums, would likely trigger penalties under the Affordable Care Act’s employer mandate, the insurance official said. That might be a disincentive to use these new options — if the Trump administration were planning tough enforcement of the employer mandate.
The bottom line: Other sections of Trump’s executive order will likely pull healthy people out of the individual market; this one could push unhealthy people into it. Insurers are uneasy about both sides of that equation, and say they haven’t had a chance to offer the policy feedback previous administrations would have sought out.
What else to expect from Trump’s executive order
Here’s a quick rundown of what else to expect from today’s executive order:
The order itself probably won’t fill in the details of how its policy changes would work. Look for broad outlines, with the nitty-gritty coming separately — probably in the form of a proposed rule from the Labor Department.
Although the public will technically have an opportunity to comment on that proposed rule, the insurance industry official told me the final version is largely already written.
The policy:
Association health plans: Trump will likely make it easier for individuals (for example, a group of freelancers) to band together and buy insurance like a large employer would.
New associations will likely need some form of approval before they can start buying insurance, but insurers don’t expect that process to be much more than a rubber stamp.
Short-term plans: Trump is expected to let people hang onto short-term, stopgap policies for a full year; they’re currently limited to three months. Those plans don’t cover much and don’t have to comply with many of the ACA’s consumer protections.
Total impact: Insurers and independent policy experts fear that both of those measures would weaken the individual market by pulling healthy people out of it and into skimpier, cheaper coverage.
President Donald Trump signed an executive order Thursday that rolls back a number of Affordable Care Act (ACA) provisions that set minimum requirements for health plans.
The order will allow small businesses and groups of people to band together and buy insurance as an association. The association health plans (AHP) available to them do not have to meet the requirements of the ACA, such as protection for people with pre-existing conditions and essential health benefits.
In addition, the order expands the use of short-term plans that also have looser requirements and allows plans to be sold across state lines.
Dive Insight:
Broadly, the executive order loosens the requirements health plans must meet and shifts regulation away from federal levels. This could lower out-of-pocket costs for people who don’t use much care, but would likely result in major cost increases for people with pre-existing conditions.
The biggest concern with offering these plans is that it would lead payers to cherry pick young, healthy people who are less expensive for payers. But separating them from people who will need services creates an unbalanced risk pool. That can quickly lead to prohibitive out-of-pocket costs for people who have a pre-existing condition or who unexpectedly need high-cost care.
There are still several steps to be taken before the order could have a real impact. HHS and the Department of Labor have been instructed to write new regulations which will go through the regular notice and comment process. The specifics of those regulations will be important to how the order ultimately plays out. Also, the order will almost certainly see a legal challenge. Still, it signals that Trump’s White House is ready to find ways of undercutting the ACA despite the high-profile legislative failures earlier this year.
It’s far from the first sign, though. HHS has drastically cut back efforts to promote this year’s open enrollment period, which begins Nov. 1. The ACA’s overall advertising budget was slashed by 90%, community groups that receive federal funding to help people enroll have been devastated by cuts and HHS recently barred regional directors from participating in enrollment events.
Short-term plans are inexpensive for people who are healthy, but they can exclude people with pre-existing conditions. They have previously been allowed for a limited stretch, such as three months, but extending that time and allowing these plans to count toward the individual mandate will mean an unstable risk pool.
Allowing plans to be sold across state lines is a staple of conservative health policy, but there is little reason to believe it would actually lower costs. There are also many unanswered questions about how these plans would be relegated.
HENRY KOTULA 