With the stroke of a pen, President Trump has set the Affordable Care Act (ACA) on loose footing in signing his latest executive order. The order, which will have vast repercussions on the health insurance markets, seems to be the latest of many attempts to fulfill his goals of broadening lower-cost insurance options, letting employers give employees money to purchase their own coverage, slowing down consolidation in the insurance and hospital industries — and setting up Obamacare for failure.
In addition to the executive order, the White House has announced that President Trump plans to end subsidies to health insurance companies, which help low-income individuals cover out-of-pocket costs. This comes amid claims from Speaker Paul Ryan and the White House that the appropriation of the funds used for these subsidies was illegal without the consent of Congress.
Without the subsidies, which were expected to total $9 billion in the coming year, insurance companies say they will have to greatly raise premiums and possibly pull out of the ACA’s insurance exchanges, a massive blow to the marketplace that may put the ACA in peril as more individuals lose access to affordable coverage. Insurers still may opt to sue, get an injunction, and force payments to be made.
These aren’t the first initiatives from the president meant to undermine the ACA: Under President Trump, the signup period for the ACA has been shortened, and large cuts in federal funding for advertising and enrollment help are already causing ripples in the marketplace.
The president’s new executive order, though potentially taking months to fully come into effect, is expected to allow individuals and small companies to band together to buy insurance across state lines through what are known as association health plans. The plans, though often much cheaper than other alternatives, tend to offer policies with low premiums but five-figure deductibles. Such policies are exempt from certain guidelines that normally classify the minimum essential coverage under the ACA. These cheaper, slimmed-down plans are likely to draw younger, healthier individuals away from plans available on the marketplace, forcing the older and statistically less-healthy population left in the marketplace to absorb the expected increases in cost. Association health plans may be of particular interest to senior care, which employs a younger workforce. And, with fierce competition in the industry due to a staffing shortage, employers may feel pressure to offer policies comparable to those of their competitors.
Though association health plans existed prior to the president’s executive order, it is possible that these plans may no longer have to abide by state regulations, increasing their availability and lowering their rates and coverage even further. Some states, however, may seek to regulate some of these new plans, or sue if they feel their regulatory authority is being undermined. The attorneys general of New York, California and other states are suing the Trump administration to prevent billions of dollars in subsidies to Obamacare insurers from being cut off.
On top of easing regulations on association health plans and ending subsidies to health insurance companies, President Trump is also seeking to expand the availability of short-term insurance policies, which offer limited coverage and are, under normal circumstances, intended for individuals who are between jobs or coming off their parents’ health insurance policies. These plans don’t need to meet the ACA’s protections for individuals with pre-existing conditions, and if they are abused by healthy individuals to serve as their primary healthcare, short-term policies will only serve to further increase premiums and destabilize the markets.
Together, the combination of the deregulation of association health plans, increased use of short-term policies, and the ending of subsidies to health insurance companies all adds up to the creation of a disaster for the ACA, consisting of major increases in premiums and lower participation in the health insurance marketplace.
Though there is still much that is unknown as providers await these changes to take effect, the continuing threats of uncertainty in the individual markets are already compounding the feelings of unease among insurers, leading to further destabilization of the marketplace.
In fact, a newly released Kaiser Health Tracking Poll indicates that this uncertainty is having an impact on voters as well, with a 66% majority saying that they’d rather the president work with Congress to create a bipartisan solution to stabilize the marketplace than continue to focus on repealing and replacing the law.
Among all this uncertainty, it is important to remember that this executive order does not repeal the employer or individual mandate of the ACA, which requires that employers offer their employees health insurance options that meet minimum coverage, and that individuals are in possession of such insurance. However, for employers, it is still unclear whether this order will have any impact on the ACA-mandated form 1095-C.
In the absence of a legislative solution to repeal the ACA, it has become clear that President Trump will be taking a more hands-on approach with the health insurance issue.
Learn more about how SmartLinx can help you stay compliant through these changes with our ACA Director.
About the Author
As Compliance Expert at SmartLinx, Tom Jegou oversees SmartLinx innovations in our payroll and compliance systems. Tom is focused on transforming client needs into leading-edge products. Tom leads cross-functional teams from a product's conception through to its launch. Tom led the design of the 1095-C and Payroll-Based Journal reporting features in the WorkLinxTM suite. Since 1996, Tom has worked with every aspect of Human Capital Management Systems. He has defined, supported, implemented and managed Payroll, Time and Labor and HR systems. Tom is a Certified Payroll Professional through American Payroll Association.More Content by Tom Jegou