A bulletin passed along by our friend in Mississippi, and health insurance expert, Gerard Gibert tells us of a major change coming to the health care market courtesy of an executive order by President Trump…
In a few hours, the President will sign an Executive Order allowing small businesses to band to together to form Association Health Plans (AHP).
These AHPs will not be subject to the full complement of ObamaCare coverage requirements (10 Essential Health Benefits), or the various insurance reforms (no lifetime or annual limits and charging sick/old more than young/health). They will also be salable across state lines.
In addition, employees of these small businesses that participate will be able to use tax-beneficial Health Reimbursement Accounts to pay for premiums, thus enjoying the same pre-tax status as employees who obtain coverage in the standard employer group market.
With a stroke of the pen, Trump’s EO will also allow purchase of short-term plans with a one year term. Under OCare, the term is 3 months. This is a fraction of the market (160k), and is primarily used by young folks moving off of parents’ coverage while looking for work. Or, those that don’t want COBRA between jobs.
This will likely cause more chaos for the OCare exchanges, as more young, healthy folks will move to these skinny plans, leaving insurers with with only old, sick people.
Rand Paul must be ecstatic, the AHP concept is something he has been pushing for, as has Dr. John Goodman of the Heritage Foundation.
From a political perspective, this is a bit of slap in the face to Mitch McConnell and the Senate for failure to move on ObamaCare as promised to Republican voters.
The order would direct federal agencies to take several actions through federal rule-making. Small employers would potentially be able to band together from across the country to create “association health plans” and buy insurance together outside of Obamacare. The order will also call for expanding the availability of low-cost, limited, short-term insurance plans, as well as the use of tax-advantaged accounts to pay for health-care expenses.
“The policies outlined in the executive order are the beginning of the actions the administration will take to provide relief to people harmed by Obamacare,” said Andrew Bremberg, director of the administration’s domestic policy council. “You should expect additional actions coming from the administration in months to come.”
Critics have said that such actions will end up pulling healthier people out of Obamacare’s existing markets, which have strict requirements on what services have to be covered, such as maternity or mental health coverage. The result would be fewer people in the Affordable Care Act’s markets, and the ones who remained could be sicker — driving up premiums, and forcing more people to look elsewhere for coverage.
“It would essentially create a parallel regulatory structure within the individual and small group markets that is freed from the various consumer protections established,” said Spencer Perlman, a policy analyst with Veda Partners, a Bethesda, Maryland-based advisory firm. “The end result could be a death spiral for ACA-compliant plans.”
Creative destruction of Obamacare? Sounds good to us.
This is a nice start. What we want to see going beyond this, though, is association health plans which are not tied to employment. The idea of having small businesses band together for health insurance coverage is, believe it or not, a staple of Bobby Jindal’s health care reform package from years ago – which could be an indication that the rumors of Jindal as a potential successor to Tom Price as HHS Secretary could have some meat to them. We’d still say that’s a long shot, but it’s fair to say what Trump is doing is taking a relatively old idea and trying it out.
But while it will certainly help to cover more people with more affordable insurance than the crappy, overpriced policies the Obamacare exchanges offer, it’s still employer-based health insurance. We need to get health insurance detached from employment – so let’s hope the next batch of regulatory reforms to the health care market make moves along those lines.
Let’s remember that before the Franklin Delano Roosevelt administration injected the federal government into the health care market, most people got some sort of health insurance through membership in voluntary organizations; whether it was the Odd Fellows or the Moose Lodge or the local Italian-American social club or whatever. There is no reason why that shouldn’t be brought back to the fore with things like college alumni associations or the Rotary or churches or what have you; if nothing else that might aid in restoring the civil society which has been so badly frayed lately that people aren’t joining things anymore.
In any event, this is a really good development and it moves in a direction we’ve called for during the painful Obamacare repeal debate.
UPDATE: Sen. Bill Cassidy, who was the author of the Senate’s last attempt at an Obamacare repeal and has been neck-deep in the health care debate, just put out a press release…
WASHINGTON—Today, US Senator Bill Cassidy, MD (R-LA) released a statement following President Trump’s Executive Order on health care. The goals of this Executive Order is to provide Americans with more affordable healthcare choices and greater control over their health care decisions.
“President Trump is committed to helping the families and businesses harmed by Obamacare. I will continue to work with him on solutions like Graham-Cassidy that will return power back to the patient,” said Dr. Cassidy. “Premiums are unaffordable for working families, preventing them from getting the coverage they need. With this order, the president is trying to create an opportunity for those folks to have insurance.”
President Trump signed the Executive Order to reform the United States health care system to take the first steps to expand choices and alternatives to Obamacare plans and increase competition to bring down costs for consumers.
To read a question/answers sheet on the Executive Order, click here.
The order directs the Secretary of Labor to consider expanding access to Association Health Plans (AHPs), which could potentially allow American employers to form groups across State lines.
· A broader interpretation of the Employee Retirement Income Security Act (ERISA) could potentially allow employers in the same line of business anywhere in the country to join together to offer health care coverage to their employees. It could potentially allow employers to form AHPs through existing organizations, or create new ones for the express purpose of offering group insurance.
· By potentially making it easier for employers to band together, workers could have access to a broader range of insurance options at lower rates in the large group market.
· Employers participating in an AHP cannot exclude any employee from joining the plan and cannot develop premiums based on health conditions.
The order directs the Departments of the Treasury, Labor, and Health and Human Services to consider expanding coverage through low cost short-term limited duration insurance (STLDI).
· STLDI is not subject to costly Obamacare mandates and rules. One study found that on average STLDI costs one-third the price of the cheapest Obamacare plans.
· Despite its low cost, STLDI typically features broad provider networks and high coverage limits.
· The main groups who benefit from STLDI are people between jobs, people in counties with only a single insurer offering exchange plans, people with limited coverage networks, and people who missed the open enrollment period but still want insurance.
The order directs the Departments of the Treasury, Labor, and Health and Human Services to consider changes to Health Reimbursement Arrangements (HRAs) so employers can make better use of them for their employees.
· HRAs are employer-funded accounts that reimburse employees for healthcare expenses, including deductibles and copayments.
· The IRS does not count funds contributed to an HRA as taxable income.
· Expanded HRAs could potentially give American workers greater flexibility and control over how to finance their healthcare needs