King Trump has issued Executive Orders to create loopholes that will destroy the individual markets for health insurance. Trump has been threatening to destroy the Affordable Care Act by executive order after the Republican Congress failed to repeal ObamaCare. The basic idea appears to be an expansion of the kinds of entities who can take advantage of so-called “association health plans” — group insurance plans normally available to trade associations and other groups of business people — and then a reclassification of these plans so that they do not have to comply with Obamacare regulations. It’s sort of a Great Escape from Obamacare for small businesses and perhaps even individuals. The idea would mostly attract younger and healthier consumers seeking cheaper and skimpier health plans, leaving older, sicker, and therefore more expensive people to sink the remaining Obamacare exchanges with their costly problems.
The across-state-lines aspect of this plan — a big deal in the pre-Obamacare days when there were few if any national standards for health insurance — would not be nearly as significant as the exemption from Obamacare’s essential health benefits and preexisting-conditions requirements.
The idea of expanding and deregulating association health plans as a stand-alone initiative is especially dangerous when pursued separately from other conservative health-reform ideas that might help counteract some of its effects, such as subsidies for high-risk pools for “left behind” people with preexisting conditions, or more money for states to come up with their own ways of managing risk.
Health-policy wonk Tim Jost said of the proposed executive order that it would “destroy the small-group market …. We’ll be back to where we were before the Affordable Care Act.”
Loophole No. 1: Expanded Association Health Plans
Before Obamacare, associations were free to model their national plans around the regulatory requirements of any individual state. The Affordable Care Act put an end to this state of affairs, by subjecting association health plans to the same essential health-benefit requirements as individual small businesses.
Trump’s executive order calls on the secretary of Labor to expand the use of association health plans by making it easier for associations to form across state lines, and to band together for the exclusive purpose of purchasing health insurance.
This could allow new association health plans to grow so big, they qualify as large employers — and Obamacare does not require large employers to offer plans that cover essential health benefits. This would allow younger, healthier small businesses to exit the small-group market, thereby increasing premiums for the older, sicker businesses which are left behind.
And the Trump administration is reportedly considering an even more radical change, one that could effectively end Obamacare as we’ve known it. According to Vox, the White House may try to allow individuals to buy into cheap, skimpy association health plans. This could set off a death spiral in the individual market as healthy people flee for cheap association plans, thereby leading insurers to raise premiums (to defray the cost of covering an increasingly sick pool of enrollees), thereby leading even more healthy people to flee for cheap association plans, thereby leading insurers to raise premiums, etc., etc. …
Loophole No. 2: Lengthened duration of short-term insurance
Short-term health insurance policies are free from Obamacare’s regulatory requirements. They offer few services, and are designed for people during a temporary period of unemployment. Before the Affordable Care Act, Americans could remain on short-term health insurance for up to a year. But to prevent healthy people from using the plans to avoid subsidizing the sick on the individual market, the Obama administration brought that limit down to three months.
Trump’s order calls for expanding access to short-term plans by reversing this rule. Once again, the effect would be to bleed healthy enrollees from the Obamacare exchanges. The effect, once again, would be to engineer a destabilizing increase in premiums for those in the individual market.