The Trump administration is releasing rules that would make it easier for small businesses and self-employed individuals to buy insurance that does not comply with Obamacare’s insurance regulations, another front in the White House’s attempts to undermine the law.
Association health plans, the subject of the new rules, do not have to follow the same rules as individual policies sold under Obamacare, meaning they are not required to cover all of the essential health benefits mandated by the Affordable Care Act, like maternity care, an important piece of the law’s protections for people with preexisting conditions.
Trump had asked federal agencies last fall to look for ways to expand the use of association health plans — groups of small businesses that pool together to buy health insurance — and to broaden the definition of short-term insurance, which is also exempted from the Affordable Care Act’s rules.
Overall, the Trump administration is expected to make cheaper plans with skimpier benefits more available — and while that may be a better deal for healthy people who do not receive federal assistance, experts worry the push toward these plans will damage the ACA’s marketplaces. Costs could rise for federal taxpayers who must cover the higher costs for subsidized customers, and higher-income people who nevertheless need more comprehensive insurance could be forced to choose between paying more for the more expensive Obamacare plans or buying skimpier coverage that might not cover what they need.
“The president still firmly believes that Congress must act to repeal and replace Obamacare, but before that can be done, this administration must act to provide relief,” Andrew Bremberg, who oversees domestic policy at the White House, told reporters last year. “We expect these policy changes to potentially benefit tens of millions of Americans over time.”
During an impromptu end-of-the-year interview with the New York Times, Trump touted the expansion of these association health plans and the repeal of Obamacare’s individual mandate in the Republican tax bill as his big wins against the health care law in 2017.
“We’ve created associations, millions of people are joining associations. Millions. That were formerly in Obamacare or didn’t have insurance. Or didn’t have health care. Millions of people,” he told the Times. “That’s gonna be a big bill, you watch. It could be as high as 50 percent of the people. You watch. So that’s a big thing.”
The president was surely overstating the impact of his executive order. But policy experts warn that together, these changes could represent a serious threat to Obamacare: Trump wants to open more loopholes for more people to buy insurance outside the health care law’s markets, which experts anticipate would destabilize the market for customers who are left behind with higher premiums and fewer insurers.
Association health plans are exempted from core Obamacare requirements like the coverage of certain essential health benefits. The final rules also allow some individuals to join these plans too, the Wall Street Journal reported, which could hurt the individual insurance marketplaces by drawing younger and healthier people away from them. In much the same way, short-term insurance could also take healthier people out of the law’s markets.
The effect won’t be immediate, and its extent is unclear. Some actuaries expect short-term insurance plans and the repeal of the individual mandate to damage the Obamacare markets more than association health plans. But Trump and the GOP’s actions collectively do present a long-term risk to the ACA.
“The clear intent of the executive order is to create a parallel insurance market exempt from many of the consumer protections in the Affordable Care Act,” Larry Levitt at the Kaiser Family Foundation told me last year. “This has the potential to siphon off healthy people with skinnier benefits and cheaper premiums, leaving behind a sicker pool of people under ACA plans.”
Association health plans, explained
An association health plan, as Vox’s Sarah Kliff has previously explained, is a way for a group of small businesses to pool together to buy insurance, giving them more purchasing power and access to cheaper premiums. A group of bakeries, for example, might form a bakers association and purchase health coverage together. The most famous examples have been farm bureaus, which allowed independent farming businesses to band together and get insurance.
Before Obamacare, national associations could pick and choose which states’ insurance rules they wanted to follow and use those rules to guide the plans they offered nationwide. The bakers association could choose to follow the rules for, say, the Alabama insurance market, which mandates coverage of relatively few benefits, for all its bakeries in New York, a state with many mandates.
The result was often health insurance that skirted state rules and was a better deal for businesses with young and healthy employees, who are likely to prefer skimpier health plans. A former insurance regulator described the situation prior to the ACA to Kliff as being “a race to the bottom, with some associations offering lower-cost plans that covered virtually nothing.”
Obamacare changed these rules. Association health plans were treated as small businesses and were therefore required to cover all of the law’s mandated benefits.
Essential health benefits, requiring that insurers cover everything from hospital care to prescription drugs to maternity care, are central to the ACA’s insurance protections: They prevent plans from crafting their coverage to attract mostly young and healthy customers at the expense of older and sicker people.
Why Trump’s executive order undercuts Obamacare
Trump is rolling back those changes. Under the executive order, new regulations are expanding the use of association health plans, easing federal rules that require associations be from the same state and that prevent associations from forming exclusively to provide health coverage.
The result in many cases could be that these new association health plans would be considered large employers when it comes to health insurance. Large employers are not subject to the same rules as individual or small-group plans under Obamacare. Most notably, they do not have to cover all of the law’s essential health benefits or meet the requirement that insurance cover a minimal percentage of a person’s medical bills.
Association health plans will be freed to craft skimpier (and cheaper) health plans that appeal only to businesses with younger and healthier employees. Small businesses left in Obamacare’s marketplace would likely face higher costs and fewer options as the market became less attractive to insurers.
“It will destroy the small-group market,” Tim Jost, a law professor at Washington and Lee University who generally supports Obamacare, told me before the order was signed. “We’ll be back to where we were before the Affordable Care Act.”
The final regulations expanded access to association health plans beyond small businesses, too, by allowing self-employed individuals with a shared interest (industry or geography, for example) to join these groups.
The individuals likely to flee the Obamacare markets for association plans would probably be younger and healthier, leaving behind an older, sicker pool for the remaining ACA market. That has the makings of a death spiral, with ever-increasing premiums and insurers deciding to leave the market altogether.
“The ability for individuals to purchase health insurance through an association really puts the individual market at risk and destabilizes it over the long term,” Kevin Lucia, who studies the market at Georgetown University, told me before the order had been signed. “When you have market segmentation, it over time leads to higher premiums and it becomes less attractive to carriers.”
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