Trump Signs Executive Order Setting Path to Expand Association Health Plans
On Thursday, President Trump signed an executive order (EO) to broaden availability of Association Health Plans (AHPs) and short-term health insurance policies. These health plans would be largely exempt from Affordable Care Act’s (ACA) coverage requirements and are seen as a potential threat to the stability of the health care marketplaces. President Trump has said the move will bring greater competition and lower premiums to insurance markets across the country.
It is important to note that this order likely does not have an immediate effect. The order instructs the Department of Health and Human Services (HHS), Treasury, and Department of Labor (DOL) to “consider” the proposed policies, for which implementation would likely necessitate formal notice and comment rulemaking. Details of the order follow below:
- Association Health Plans (AHPs) – AHPs are health plans purchased by groups of small businesses in order to pool purchasing power for their employees. Prior to the ACA, such plans were allowed to be sold across state lines but only had to comply with insurance rules from the state they were sold from. The ACA changed the rules for AHPs, and subjected them to the same insurance market requirements as plans sold in the small group market (i.e. essential health benefits [EHB], actuarial value [AV] requirements).
Today’s EO instructs the DOL to consider reinterpreting AHPs as the type of insurance subject to insurance requirements that apply to large group plans under the Employee Retirement Income Security Act (ERISA), which are not subject to ACA EHB and AV requirements. The Administration notes that the proposal aims to provide small business workers with a broader range of insurance options at lower rates in the large group market.
The Administration elaborates that “a broader interpretation [of ERISA] could potentially allow employers in the same line of business anywhere in the country” to form AHPs across state lines. The Administration says employers would not be able to exclude employees from the plan or set premiums based on health status. Despite early press reports that individuals would be able to buy into these AHPs, it at this point remains an open question whether that would be possible.
- Short-Term Limited Duration Insurance (STLDI) – In the EO, the President directs the agencies to consider expanding access to STLDI. The Obama Administration had restricted such plans to a duration of three months, with enforcement taking effect on April 1, 2017. The EO notes that STLDI is not subject to ACA rules and estimates that it costs one-third the premium of ACA-compliant coverage. According to the Administration, STDI nonetheless may have “broad provider networks and high coverage limits.”
The EO cites several populations for whom STLDI may be an option, including those between jobs as an alternative to Consolidated Omnibus Budget Reconciliation Act (COBRA), those with a choice of only one Exchange insurer, and those who missed the open enrollment period. It is unclear whether STLDI ultimately would be considered minimum essential coverage and satisfy the individual mandate penalty.
- Health Reimbursement Arrangements (HRA) – The EO directs the agencies to consider modifications to HRAs “so employers can better use them for their employees.” The Administration notes that “expanded HRAs could potentially give American workers greater flexibility and control over how to finance their healthcare needs.”
This could include using employer-contributed, non-taxable HRA funds toward individual market premiums, which had been restricted under the Obama Administration. In announcing the EO, President Trump said one-third of small business employees receive coverage at work and that many seek Exchange coverage or go uninsured and pay the mandate penalty.
Many commenters have highlighted that broadening access to AHPs and STLDI is an attempt to opt-out of ACA coverage requirements, which could have a significant destabilizing impact on the individual and small group market if healthier people are drawn to these new alternative options. Importantly, these plans would be exempt from the Essential Health Benefits (EHB) requirement, which requires plans to offer mental health and substance use coverage.
Congressional reactions have fallen along partisan lines. Senate Finance Ranking Member Ron Wyden (D-OR) said the EO “will undermine protections for those with pre-existing conditions, segregate the market into sick and healthy, and reopen the door to scam health insurance that doesn’t cover real care.” House Energy and Commerce Chairman Greg Walden (R-OR) and Health Subcommittee Chair Michael Burgess (R-TX), meanwhile, welcomed the EO and said it would provide “more affordable options.”