Order directs Departments of Treasury, Labor, and HHS to implement changes

On October 12, President Donald Trump signed an executive order directing an overhaul of major federal regulations that would encourage the rise of lower cost, loosely regulated health insurance plans. The directive focuses on the expansion of association health plans (AHPs), which enable small-business owners, trade groups, and others to band together to offer their employees health insurance. Such plans are exempt from certain Affordable Care Act (ACA) rules, including requirements that they cover essential health benefits. President Trump said "the time has come to give Americans the freedom to purchase health insurance across state lines, which will create a truly competitive national marketplace that will bring costs way down and provide far better care." In addition to expanding AHPs, the executive order increases the allowable coverage period for short-term limited duration insurance (STLDI) to a year and expands the ability of employers to use Health Reimbursement Arrangements (HRAs) to reimburse employees for individual health plans.

The order directs the Secretary of Labor to expand access to AHPs, broadening the ability of employers in the same line of business to join together to offer health insurance. This change is expected to exempt them from many of the ACA's benefit requirements. To make those changes, the administration is already working to reinterpret the Employee Retirement Income Security Act (ERISA), the federal law that governs many workplace benefits, to broaden the types of groups that qualify as group health plans. The final decision about how the new rules will apply will be subject to the public regulatory notice and comment process. The breadth of the regulatory guidance will be a significant factor in determining the order's potential impact on the market. Some insurers have raised concerns that the guidance could increase instability in the marketplace by exacerbating deterioration of the risk pool.

The order also directs the Departments of the Treasury, Labor, and Health and Human Services to expand coverage through low cost STLDI plans, which are also not subject to many ACA requirements, increasing the allowable coverage period from the ACA-mandated three-month limit to the previous limit of one year. According to the administration, the groups who benefit from STLDI plans are people between jobs, people with limited insurance options or coverage networks, and people who missed the open enrollment period. Historically, STLDIs have been used to circumvent insurance requirements and are used to provide full or partial-year coverage, such as in academic settings.

The order also aims to revise guidance for Health Reimbursement Arrangements (HRAs) to allow employers to make more expansive use of them for their employees. HRAs are tax-exempt, employer-funded group health plans that reimburse employees for healthcare expenses. While employers can already set aside pre-tax dollars to help cover employees' health care costs, the order looks to expand those programs so they can be used to help employees pay for the cost of individual health plan premiums. Regulatory guidance will be necessary to enable the shift to a defined contribution approach, which some employers hoped would enable them to shift risk to the individual market and reduce health care expenditures.

While it remains to be seen how quickly the administration will be able to implement the order, it has the potential to upend the way businesses and individuals buy coverage. While some trade groups and associations argue this would expand health care choices for small employers and lower premiums for their employees, others caution it would result in discrimination and increased cost-sharing for individuals with preexisting health conditions along with higher costs and fewer coverage options for small businesses remaining in ACA marketplaces, due to a dwindling and increasingly unhealthy risk pool. Efforts to draft guidance are already underway and new details are expected to emerge in coming days, which will shed light on how the executive order will affect the employer mandate and other implications for the health insurance market.

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