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President Donald Trump signed today an executive order that will allow skimpy health plans— some that Obamacare outlawed — back into the insurance markets.
Dylan Scott wrote a lengthy story about what exactly the executive order does, which you should definitely read. The upshot: The Trump administration is planning to bring back certain health plans that don't have to play by Obamacare rules. They can charge higher premiums to sicker patients, for example, or not cover the health law's essential health benefits.
It turns out, we can actually see a preview of what this might look like in Tennessee. It appears to be the only state that has allowed this type of insurance plans to stick around, due to an odd loophole in state law that has allowed these plans to continue despite the Affordable Care Act's new restrictions.
The expected Trump executive order would loosen the rules on something called "association health plans." These are plans where small businesses band together to purchase coverage for all their employees. A bunch of bakeries, for example, could form a bakers' association that has more muscle to negotiate better insurance rates.
Before the Affordable Care Act, these association plans had an advantage: They offer skimpy plans that wouldn't appeal to people who use a lot of health care — a roundabout way of keeping premiums down by keeping sick people out. Obamacare outlawed this behavior by requiring association health plans to offer the exact same benefits that all other individual and small business insurers do. And it required association health plans to treat healthy and sick people the same.
Except that didn't actually happen in Tennessee. State insurance regulations have actually created a loophole where a major association health plan called Farm Bureau is not subject to Obamacare regulations. It can offer skimpy plans and it can charge sick people higher premiums.
Farm Bureau is open to any Tennessee resident; you don't have to be a farmer to enroll. The insurance plan has previously estimated it has 23,000 members in these plans that do not comply with the Obamacare rules.
And this hurts Tennessee's Obamacare marketplace. Those 23,000 people buying the skimpier health plan are presumably younger and healthier. Segmenting those people out of the Obamacare marketplace raises premiums for everyone else left behind.
The Society of Actuaries estimated in 2016 that Tennessee's marketplace has the sickest enrollees in the entire country. The state also has some of the highest Obamacare premiums in the entire country, too. In 2017, a mid-level plan cost, on average, $472 per month.
We can't say for sure that is the direct result of allowing Farm Bureau plans to persist. But we do know that keeping the healthy people out of the market certainly isn't helping.
It also makes the Tennessee marketplace undesirable for health insurers. The state has seen, year over year, fewer and fewer health plans who want to be seen on the Obamacare marketplace. Insurance regulators there have had to scramble to fill bald spots: places where no insurance plans want to sell.
We know what the future looks like under the provisions reportedly in Trump's executive order. The marketplaces work less well as healthier people flock to the cheaper plans with fewer regulations. And that will, without a doubt, make some Obamacare enrollees happy. Those who are healthy will be able to get a plan with fewer benefits and lower premiums.
But here's the thing: that outward migration of healthy enrollees would undoubtedly hurt the sicker people who wouldn't be allowed into the cheap plans — or wouldn't want them, because the coverage was so skimpy. Splitting the insurance market into different pools — as this executive order would reportedly do — creates winners and creates losers. The losers would be sicker Americans, who would once again have to navigate an individual insurance market that is expressly discriminating against them.
Chart of the Day
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Women spent a lot less on birth control after Obamacare. With the new regulations now out, it's worth looking back at the effect the contraceptive mandate has had. Kaiser Family Foundation data shows that the percent of women paying out of pocket for birth control declined significantly after the requirement began.
Kliff’s Notes
Your daily top health care reads, with research help from Caitlin Davis
News of the day
- “Trump to Sign Order Easing Health Plan Rules, Official Says”:“President Donald Trump will sign an executive order next week to start lifting some insurance rules set by his predecessor’s Affordable Care Act in the aftermath of the failed Republican bid to repeal the law, a senior administration official said Saturday.” —Louise Radnofsky, Stephanie Armour, and Anna Wilde Mathews, Wall Street Journal
- “Republicans privately admit defeat on Obamacare repeal”: “After multiple failures to repeal the law, the White House and many GOP lawmakers are publicly promising to try again in early 2018. But privately, both House and Senate Republicans acknowledge they may never be able to deliver on their seven-year vow to scrap the law.” —Jennifer Haberkorn, Politico
- “UnitedHealth defeats federal Medicare Advantage suit”: “A federal judge in California struck down a U.S. Department of Justice lawsuit claiming that UnitedHealth Group and affiliated health plans scored millions of dollars in inflated Medicare Advantage payments by making patients seem sicker than they actually were.” —Erica Teichert, Modern Healthcare
Analysis and longer reads
- “Can the U.S. Repair Its Health Care While Keeping Its Innovation Edge?”: “The United States health care system has many problems, but it also promotes more innovation than its counterparts in other nations. That’s why discussions of remaking American health care often raise concerns about threats to innovation. But this fear is frequently misapplied and misunderstood.” —Aaron E. Carroll and Austin Frakt, New York Times
- “Patients, Health Insurers Challenge Iowa's Effort To Privatize Medicaid”: “The state moved about 600,000 people on the government-run health program into care that is managed by for-profit insurance companies. The idea is that the private companies would save the state money, but it has been a rocky transition in Iowa.” —Clay Masters, NPR
- “California governor signs drug price transparency bill that infuriates pharma”: “In a blow to the pharmaceutical industry, California Gov. Jerry Brown on Monday signed a bill into law that requires drug makers to explain and justify price hikes, making this the latest state to actively address the high cost of medicines.” —Ed Silverman, STAT
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