US President Donald Trump issued two executive orders on Thursday that stand to upend the individual and small group health insurance markets established by the Affordable Care Act. The first order directs the Labor Department to study ways to allow small businesses and possibly individuals to buy insurance collectively through nationwide association health plans (AHPs), while also looking to ease restrictions on the purchase of short-term insurance policies that don’t have to follow the ACA’s strict coverage requirements, and enable more organizations to give employers money to buy their own coverage through health reimbursement arrangements or HRAs. The second order immediately ends the cost-sharing reduction subsidies the federal government had been paying to insurance companies to induce them to offer affordable coverage to low-income Americans.
Neither of these changes has a direct impact on the way large and mid-sized enterprises provide insurance for their employees, but they could have repercussions for the overall health insurance market and create uncertainty about the future of the ACA. As Stephen Miller explains at SHRM, the first order won’t change anything for larger employers, but could expand health insurance options for smaller ones:
“For most large employers and their employees, the executive order will result in no change in health coverage,” agreed Steve Wojcik, vice president of public policy at the National Business Group on Health, an association of large employers. As for smaller employers and some large employers, “the proposed changes may make it easier for employers to afford coverage and to help their employees pay for coverage if they buy it on their own.” …
“The direction the order takes is to liberalize the rules to build large insurance pools of small employers. Spreading the risk across large numbers of participants in an insurance pool is thought to bring insurance premium stability,” said Perry Braun, executive director at Benefit Advisors Network (BAN), a Cleveland-based consortium of health and welfare benefit brokers. “It will be interesting to see what new entrants enter the market to aggregate small businesses to build the large pool of clients.”
Even with expanded options for offering HRAs, Christopher Condeluci, who runs a health benefits consultancy in Washington, DC, tells the Wall Street Journal that most larger companies will probably maintain their existing benefits packages, in order to better retain talent. Employers in high-turnover industries with large numbers of low-wage employees might consider shifting to HRAs, however. Some of these employers have shifted their employees onto the private insurance exchanges created by the ACA in the past year or so as these exchanges have stabilized.
Critics of those shifts, however, have said that tiered health insurance models benefit only those employees who don’t need much health care, while shifting more of the cost burden onto higher-risk groups. Indeed, these critics say Trump’s changes will have the same effect, drawing healthier individuals out of the risk pool of the individual market and into cheaper AHPs that offer less comprehensive benefits. This in turn is expected to drive up premiums for the relatively older and sicker population that remains in the individual insurance market.
The second order may do even more damage to that market by prompting insurers to either raise rates for consumers or back out of their federal contracts to sell health plans next year. It is unclear whether Trump’s attempt to end the CSRs will prevail, however, as this order will likely face legal challenges. The state attorneys general of New York and California have both said they plan to sue the federal government to have the subsidies reinstated.
Again, these orders may not have direct consequences for most larger employers, but that doesn’t mean they can be ignored, since Trump’s orders will likely disrupt the ACA’s health insurance marketplaces, with unpredictable consequences for insurers and their customers.