President Trump has taken yet another step toward unilaterally upending the Affordable Care Act.
Having already shortened the enrollment period, reduced funding for outreach, and withheld a key subsidy for insurers, Trump signed an executive order Thursday that could lead to lower insurance costs for healthy Americans but higher premiums for the sick, the old, and those with preexisting conditions.
Many of the details remain uncertain — deliberately so, as they are expected to be worked out over time by various government agencies. But even states such as Massachusetts that set firm standards for health plans might see disruptions to their insurance markets because the intent is to reduce regulations nationwide.
Governor Charlie Baker said he wants to ensure “that this doesn’t negatively affect the coverage people in Massachusetts have,” but he acknowledged the new rules could have “significant consequences for states” and expressed some frustration with a process that doesn’t seem to have involved input from state leaders.
The general thrust of Trump’s proposal is to loosen regulations in two key areas: short-term insurance and policies offered by small businesses.
Let’s start with the change to short-term plans, which make up a very small part of the overall market — serving people who want limited, temporary coverage as they change careers or graduate from school.
Under current law, short-term insurance plans are exempt from several rules of the ACA, also known as Obamacare. They can provide more narrow coverage and can exclude people with preexisting medical conditions.
However, short-term plans must be truly short-term, lasting no more than three months, and they can’t be renewed. And if you do not replace the short-term plan with regular coverage, you would pay a tax penalty.
Under Trump’s latest proposal, some of these restrictions would disappear. That could mean short-term plans that last 11 months, or no tax penalty. We can’t know for sure until the federal government issues final rules. But any move that makes short-term plans more appealing hurts the rest of the individual insurance market.
Ask yourself: Who’s most likely to embrace skimpier insurance coverage? Healthy people, who don’t want to pay for services they don’t think they need. But as healthy people migrate toward short-term coverage, the Obamacare exchanges increasingly will be left with sicker folks. And that means higher average costs and higher premiums for those plans.
The other major change from Trump’s order is that small businesses would be able to band together and offer joint insurance plans, called “association” plans. And these plans wouldn’t necessarily have to cover all the “essential health benefits” mandated under Obamacare, such as mental health care and maternity care.
Such an arrangement might work fine, if it were about providing cheaper coverage to small-business employees. After all, large businesses don’t have the same level of requirements to offer essential health benefits, and coverage in that market has remained pretty robust.
Everything changes, however, if these small-business association plans are allowed to sell insurance beyond their membership, to all comers in the individual insurance market. That’s actually relatively common for association plans around the country, and it isn’t ruled out by the executive order. In that case, you end up in another downward spiral. Healthy individuals flock to the cheaper but less-thorough association plans, leaving plans in Obamacare exchanges over-burdened by sicker people and struggling to control costs.
This is already happening in Tennessee, where an odd loophole has allowed one particular association plan to charge sick people more and offer skimpier coverage. As predicted, the plan has siphoned off healthier individuals, leaving plans in the Tennessee Obamacare marketplace with the sickest population in the entire country.
Because the details of Trump’s executive order are slim, it’s hard to predict the exact impact on Massachusetts. Eric Linzer, executive vice president of the Massachusetts Association of Health Plans, said insurers are worried that the order recycles old ideas that were tried and failed in the past.
“There need to be changes made to the ACA to make it function better . . . but we shouldn’t be taking steps to gut the ACA that ultimately is going to harm more than it’s going to help,” Linzer said.
Some small-business groups, however, support Trump’s executive order and believe it could help them slash costs. A Massachusetts business owner, Dave Ratner of Dave’s Soda and Pet City in Agawam, stood just behind the president as he signed the order in the White House on Thursday.
Jon B. Hurst, president of the Retailers Association of Massachusetts, said the Trump administration’s proposal will streamline approvals for association health plans and allow Massachusetts small businesses to save money —
“This is the first bit of good news we’ve had for Massachusetts small businesses since the passage of the ACA,” Hurst said.
None of these changes are certain or inevitable. Turning Trump’s executive order into real-world regulation will take time — federal rule-making often takes years, including ample opportunity for public comment. Plus, there are likely to be legal challenges.
But one thing, at least, is clear: Trump hasn’t given up on the idea of undoing and replacing Obamacare, even if he has to do it one executive order at a time.