President Trump is expected to sign an executive order this week that could have a substantial impact on Obamacare. The order would make changes to how federal agencies handle association health plans by reversing some Obama-era regulations. The Wall Street Journal reported on the plan Saturday:
The order is aimed at expanding insurance options for Americans who buy coverage on their own or work for a small employer, and would include broad instructions for agencies to explore ways to loosen regulations and potentially lower premiums, as well as looking at three specific areas of health insurance…
Mr. Trump will order three agencies, the departments of Health and Human Services, Labor and Treasury, to take steps to make it easier for people to band together and buy insurance through “association health plans,” the official said.
Obamacare mandates certain essential benefits which tend to make insurance more expensive and leave insurers with few ways to cut costs (except through narrowing networks and raising deductibles). Association health plans currently operate under the same rules, but exempting them from those rules would allow for less comprehensive and therefore cheaper insurance options. Vox says it could “gut Obamacare.”
The order would, in effect, exempt many association health plans, groups of small businesses that pool together to buy health insurance, from core Obamacare requirements like the coverage of certain essential health benefits. It would potentially allow individuals to join these plans too, which would put individual insurance marketplaces in serious peril by drawing younger and healthier people away from them.
The draft order is also said to broaden the definition of short-term insurance, which is also exempt from the law’s regulations. Together, these changes represent a serious threat to Obamacare: President Trump seems ready 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.
Writing at HuffPost, Jonathan Cohn says the new AHP plans would bifurcate the market, leaving Obamacare with the older, sicker people and once again making the exchanges unprofitable for insurers:
The plans would tend to draw younger, healthier small businesses and individuals away from plans providing comprehensive benefits. As a variety of experts, officials, and industry groups have pointed out repeatedly, the end result could be a bifurcated insurance market ― with healthy people buying skimpy, cheap coverage, and sicker people stuck in the older, more expensive plans. The latter would frequently be a money-losing proposition for insurers, and many carriers would likely decide to abandon markets altogether.
Insurers have been dropping out of the exchanges throughout 2017, leaving about half of the counties in the country with just one insurer next year. Allowing some people to buy less expensive AHP plans means remaining insurers will be put under further pressure to either raise prices substantially again or simply drop out. And that would likely result in a fate that was narrowly avoided this year, areas of the country with no Obamacare insurance options at all.