After multiple congressional efforts to repeal/replace/modify the Affordable Care Act failed due to partisan and inter-party disagreements, President Donald Trump recently issued an Executive Order and then announced an end to Cost Sharing Subsidies to force change.
The order, titled “Promoting Healthcare Choice and Competition Across the United States,” directed regulatory agencies to focus on three areas, with the goal of facilitating the purchase of insurance across state lines and providing high-quality care at affordable prices.
Expand Access to Association Health Plans: The goal is to allow small employers to pool their risk together in an effort to have access to more affordable health insurance options. The Secretary of Labor has 60 days to propose regulations. Association Health Plans hope to achieve lower costs by allowing groups to band together to gain economies of scale. While they may gain economies on the 15-20 percent of the fixed cost component, claims are still the claims. This same principal applies to selling healthcare plans across state lines. If healthcare is expensive locally, it remains expensive locally even if the policy is written in another state.
Expand Availability of Short-Term Limited-Duration Insurance: The previous administration limited these plans to a 90-day duration. The Secretaries of Treasury, Labor, and Health and Human Services are charged with proposing regulations within 60 days to allow these plans for longer periods of times and to be renewable. Short-term policies can provide gap protection between other types of healthcare policies. However, because of the cost of ACA-compliant individual healthcare policies, many people use short-term policies as their long-term solution. This expansion would not be as important if we had affordable individual healthcare policies available.
Expand Availability and Permitted Use of Health Reimbursement Arrangements: Within 120 days of the order, the Secretaries of Treasury, Labor and HHS “shall consider proposing regulations” or revising guidance to expand employers’ ability to offer HRAs to their employees and to allow HRAs to be used with non-group coverage (i.e. individual policies). For HRAs to be a viable option, the individual marketplace needs to be stabilized and provide viable options. Otherwise, employees will not have a market to spend the employer-provided HRA funds.
The agencies will be required to write proposed regulations and then allow for public comment. It will be a challenging—if not impossible—task to get this done on time for the Jan. 1, 2018, plan year … especially the Association Health Plan goal, due to both federal and state laws and regulations which must be navigated.
The more immediate and possibly impactful announcement made by the Trump administration on October 12 is the decision to eliminate the Cost Sharing Reduction Subsidies. The administration’s announcement calls for an immediate halt to these subsidies. A federal court has already determined these subsidies to be illegal. These subsidies are used to reduce or eliminate deductibles and other health plan out-of-pocket expenses—making them attractive and more affordable for low-income individuals. The immediate cutoff delivers another severe blow to the already fragile individual marketplace.
All of these changes will put pressure on Congress to attempt some type of healthcare reform, and will also surely trigger multiple legal challenges. Early claims say that these cheaper policies provide fewer benefits and eliminate the consumer protections provided under the ACA.
Stay tuned as we prepare for an exciting race toward Jan. 1.
Ed Oleksiak is senior vice president and chief compliance officer at the Dallas office of Holmes Murphy & Associates. As chief compliance officer, he leads the firm’s national advisory group on healthcare reform.