President Donald Trump signed an executive order last Thursday, entitled “Promoting Healthcare Choice and Competition Across the United States.” The order aims to drive down costs by offering an alternative to the plans sold on the individual market exchanges established under the Affordable Care Act.
While the executive order provides some direction, we will have to wait for the various agencies to draft and finalize new rules before we have a complete understanding of the order’s impact. Regardless, in terms of the new order, it is the details of it that will matter most.
What is known so far, however, is that the executive order does three key things. The new order:
- Expands Access to Association Health Plans
The Secretary of Labor is directed to expand the conditions that would satisfy the “commonality-of-interest” requirements the Department of Labor uses to define an “employer” under the Employee Retirement Income Security Act (ERISA). Quite simply, these new definitions will allow associations to offer health insurance to their members, similar to the way large, multistate employers offer insurance under ERISA.
The end goal of this is to increase access to the more stable and cheaper “large group” market that major employers offer their employees. This may provide cost relief to individuals and businesses that are currently in the individual or “small group” markets by giving them expanded purchasing power. Critics argue that this option will undermine the actuarial stability of the individual and small group markets, hurting anyone that stays in those markets.
- Expands Short-term, Limited Duration Insurance (STLDI)
The order directs the Secretaries to extend the allowable coverage period of Short-term Limited Duration Insurance beyond its current three month limit. Sometimes referred to as “Temporary” or “Term” health insurance, STLDI is designed to help bridge gaps in insurance coverage. The STLDI is exempt from certain regulations in the Affordable Care Act.
STLDI plans are not considered minimum essential coverage for the purposes of avoiding the tax penalty (the individual mandate) for lack of insurance. However, the Trump administration may make other administrative decisions that would reduce or nullify the individual mandate in the coming months. The hope is that these plans can be “appealing and affordable alternative(s) to government-run exchanges for many people without coverage available to them through their workplaces.”
- Expands Availability and Permitted Use of Health Reimbursement Arrangements (HRAs)
Again, the executive order directs the relevant Secretaries to find ways to “increase the usability of HRAs.” Health Reimbursement Arrangements are similar to Health Savings Accounts (HSAs) with some exceptions. HRAs are tax-advantaged accounts that employers can use to reimburse employees after a healthcare expense has already been incurred. HRA contributions can only be made by employers and all money stays with the company if the employee leaves. The Trump administration argues that “expanding the flexibility and use of HRAs would provide many Americans…more options for financing their healthcare.”
To the extent the administration can use ERISA to expand availability of insurance across state lines, this could be an interesting proposal. This could be an attractive way for small practices and businesses to be able to band together to purchase group insurance as opposed to purchasing insurance in the individual or small group arena.
As is common with executive orders, the legality of these policy changes may be challenged in court. However, as is common with executive orders, the legality of these policy changes may be challenged in court. Until more of the full impact is known, then, impacted parties may just need to wait and see what the future holds, preparing in whatever ways possible to mitigate any foreseen challenges this order may inevitably bring.