Trump takes two steps to dissolve the ACA. Find out what the experts think about these two important actions.
President Trump began the process of disassembling Obamacare by using the “power of the pen” to sign an executive order on healthcare, as well as taking a separate executive notice of intent to “prop up” what the White House calls a “broken system.”
The executive order “seeks to facilitate the creation of national, association health plans and create small cap, short-term individual policies that would not be subject to current state or federal regulations,” says Jay Wolfson, DrPH, JD, distinguished service professor, Public Health, Medicine and Pharmacy, and senior associate dean, Morsani College of Medicine, University of South Florida Health.
Trump also issued a notice of intent to immediately stop federal payments for cost-sharing reductions. “This order removes subsidies that [would be] paid to insurance companies by the ACA intended to stabilize rates-separate from subsidies paid directly to low-income beneficiaries,” Wolfson says.
Between the executive order and ending cost-sharing reduction payments, the latter is much more impactful and destabilizing to the individual market, according to John Steele, managing partner at HealthScape.
“We will now see how the states and Congress respond,” he says. “Taken together, the executive order creates an avenue for non-subsidized purchasers to move to short-term or association plans. With many states allowing insurers to modify silver plan pricing with no cost-sharing reductions, we will see subsidized purchasers move to a bronze metal selection with many having a zero-premium bronze plan. Financially, we will likely see significant variation in risk adjustment transfers and profitability as the market adjusts. Without legislative or state-based actions, we will see a very different market in 2018.”
The cost-sharing subsidies are needed to help stabilize the individual market, says Rosemarie Day, president of Day Health Strategies.
“Without them, insurers will pull the trigger on prices that will no doubt be as much as 20% higher, which would create chaos, and particularly harm those people who don’t qualify for subsidies,” she says.
Wolfson agrees that stopping the payments will “directly threaten” the financial viability of ACA products.
“While the ACA has been on a trajectory to implode because of flawed actuarial assumptions and design issues, this excision of federal subsidies to insurers will expedite that implosion process,” he says. “It will make the products even more expensive for those already unable to afford them-especially lower- and middle-income persons, and it will encourage even more financial services corporations to get out of the ACA business.”
As of Thursday evening, Acting HHS Secretary Eric Hargan and CMS Administrator Seema Verma stated that the payments would discontinue “immediately.”
“This may be too late for many insurers who have already calculated premiums for 2018 to 2019, and for the November 2017 start of the new sign-up period for ACA subsidized policies,” says Wolfson. “But these pronouncements may be part of Trump’s hardline rhetorical strategy intended to advance ACA insecurity and force Democrats to the negotiating table.”
Next: Impact on consumers
Day says that the executive order is poised to “wreak havoc” on the insurance industry and create a divide in the marketplace.
“Giving people low-cost insurance options with stripped down coverage would likely cause younger, healthier individuals to leave the Obamacare ‘risk pool’, which in turn would leave exchanges catering to sicker and costlier patients because the plans are regulated and ensure a certain level of benefits,” Day says.
American radio talk show host and conservative political commentator Rush Limbaugh reacted positively to Trump’s order during his October 12 show, saying: “This change will allow for the market to begin creating policies that match the need and desire of customers, meaning they’re going to be allowed to scrub existing policies and rewrite new ones that only offer X coverage of this, this coverage, that coverage… The insurance companies will now be free to create policies that actually feature things people want.”
David Henka, president and CEO of RxTE Health, however, believes that the executive order will be largely inconsequential, at least in the near term, for a couple of reasons.
“First, it will likely be tied up in the courts for a while, and therefore not likely to have a real impact in the near term,” Henka says. “Second, it will take health plans and industry associations a long time to determine if they want to try to take advantage of this, what-if any-state requirements they would need to meet, what provider networks they can strike deals with, and if after all of that it is still worth the risk to try and launch a new plan.”
Wolfson says the executive order is “more bluster than substance.”
“This does nothing to address the destabilized insurance market, in which premiums have skyrocketed and many insurers have already exited,” he says. “States may challenge this because it would directly affect their ability to regulate products affecting citizens of their states.”