As part of his continued opposition to the Affordable Care Act, President Donald Trump signed an executive order today to loosen federal regulations on association health plans, short-term health insurance, and health reimbursement arrangements, all of which will have the effect of further destabilizing the health insurance marketplaces, and result in fewer Americans having access to affordable, comprehensive health insurance. While issuing these directives through an executive order, each of these actions will need to be implemented through future regulatory actions by the Departments of Health and Human Services, Labor, and Treasury, which will take many months to complete, including requesting and responding to public comments of any proposed regulatory changes. These executive actions to undermine the ACA are being taken while Congress has been unable to pass legislation that would either repeal and/or replace the ACA.
Allowing more employers to purchase association health plans will allow more employers to avoid purchasing health plans regulated under the ACA, which require a uniform set of “essential health benefits”, have lifetime and annual limits, prohibit different rates and exclusions for pre-existing conditions, etc. This will mean that more health insurance – primarily for healthy, working adults – will be purchased outside of the health insurance marketplaces, leaving those marketplaces with increased percentages of sicker and poorer Americans, which will drive up premiums and costs in those marketplaces.
Short-term limited duration health insurance is a little-known type of health insurance that is really intended to be gap coverage and therefore provides primarily emergency and catastrophic care coverage; it does not have to meet all the ACA rules for essential health benefits, preventive services, etc. The Obama administration limited these plans to 3 months; this executive order would lift that limitation and potentially allow these extremely limited plans to be used as an ongoing coverage option. Again, younger, healthy adults are likely to purchase such plans outside of the health insurance marketplaces, driving up premiums and costs in those marketplaces.
Finally, the expansion of health reimbursement arrangements (including health savings accounts and health reimbursement accounts), are employer-funded, tax-advantaged arrangements that set aside funds to be used to pay for out-of-pocket health care expenses. These are useful for high-income individuals who can afford to set aside significant sums as savings and can benefit from the favorable tax rules. They are not useful for low-income individuals who don’t earn enough for the “savings” to be meaningful, and cannot use the tax advantages because their incomes are not high enough.