This past Thursday President Donald Trump signed an executive order rolling back a handful of Obamacare’s regulations.
Patients and employers should celebrate the move. The administration is taking action where Congress could not to increase the number of health insurance choices available to Americans — and to reduce their cost.
First, Trump’s order aims to expand access to association health plans, or AHPs. These plans allow small, like-minded employers to join forces to purchase a large-group insurance policy together. The order may even end up permitting employers to form AHPs across state lines.
The Obama administration cracked down on AHPs by decreeing that small employers banding together under the banner of an association would not be eligible to buy a large-group policy to cover them all.
That was crucial, because Obamacare imposed many costly regulations and mandates on individual and small-group insurance — but not on policies issued in the large-group market.
Among those regulations are the essential health benefits mandates, which require all insurance policies to cover ten benefits, regardless of whether employers or beneficiaries want them.
These mandates inflate the cost of insurance. Coverage for mental health services or substance abuse treatment, for instance, can be expensive. Many small businesses and employees would gladly take lower premiums and deductibles in exchange for policies that don’t cover these services.
But they don’t have that option; their only choice is expensive, comprehensive insurance. So it’s no wonder that only one-third of businesses with fewer than 50 employees offer health insurance — or that just one-third of 1 percent of employees at such firms have coverage through Obamacare’s Small Business Health Options, or SHOP, exchange.
AHPs can also help reduce costs for small businesses by expanding their bargaining power. A group comprised of dozens of small employers has far more negotiating leverage to insist upon lower premiums or deductibles than a single small business does on its own.
Third, AHPs give small employers a way out from the risk pools for Obamacare’s small-business insurance exchanges.
Those who consider the expensive insurance available in those exchanges a good deal are likely employers with older or sicker workforces. They benefit from Obamacare’s ban on charging one customer any more than three times what any other customer pays. In effect, small businesses with healthy workforces pay more to reduce costs for those who are unhealthy.
Small employers who opted for an AHP would no longer have to subsidize their high-cost peers. And they’d be able to allow insurers to consider the aggregate health status of the workers in the association, in hopes of securing lower premiums than they might be able to get on the exchanges, where medical underwriting is prohibited.
Crucially, those with pre-existing conditions would also be protected if their employer opts for an AHP. The executive order emphasizes that employers cannot exclude employees from joining the plan, nor can they charge different premiums to different individuals covered by the plan.
Trump’s executive order also relaxes restrictions on low-cost short-term health insurance plans. Obamacare set the maximum term for such plans at three months; the executive order will probably extend that term to just under a year and allow the plans to be renewed.
Obamacare slapped strictures on short-term plans to try to force people into the insurance exchanges. But exchange plans have proven too expensive for many individuals, thanks to the many mandates governing them. Indeed, 45 percent of uninsured adults said last year that they went without coverage because it cost too much. Not even Obamacare’s individual mandate, which penalizes them for failing to secure coverage, was enough.
Expanding the availability of inexpensive short-term plans could help those uninsured Americans get covered — and provide a legitimate low-cost option for those who are tired of paying ever-more for coverage through the exchanges, especially young people.
Short-term health plans can also help those who lose their jobs, and thus their employer-sponsored coverage, outside the exchanges’ open enrollment period secure low-cost coverage when they need it most. After all, even if they’re granted an exemption for special enrollment in the exchanges, they may not be able to afford the high-cost options available there without an income.
The third component of Trump’s executive order would boost the power of health reimbursement arrangements, or HRAs. These accounts enable employers to allocate tax-free dollars to employees to help them with qualified healthcare expenses.
HRAs are particularly popular with small businesses. Under Obamacare, those with fewer than 50 employees are not obligated to offer health insurance to their workers. Many do so anyway. Others may not be able to afford to provide coverage, especially if their only options are on Obamacare’s expensive marketplaces. HRAs can allow them to give their employees at least some help paying for care.
Under the executive order, the administration is likely to broaden the definition of qualified healthcare expenses to allow for HRA funds to cover insurance premiums. That could help scores of people who previously could not afford coverage pay for it.
Republicans have promised for the better part of eight years to expand access to low-cost coverage by repealing and replacing Obamacare. President Trump’s executive order finally makes good on that promise, albeit to a small degree.
There is still far more work to be done, but the president’s actions are a great step forward in moving past Obamacare’s sorry healthcare legacy.