President Trump took executive actions last week which if implemented will have a significant impact on the Affordable Care Act (“ACA”). He announced the immediate cessation of subsidy payments to insurers participating in ACA exchanges and issued an executive order that mandates key Federal agencies responsible for administering the ACA undertake a top to bottom review of rules intended to ensure the viability of the comprehensive health plans currently offered on the ACA exchanges.
The White House unexpectedly announced that it would immediately cease funding for billions of dollars in cost-sharing reduction (“CSRs”) subsidies to insurers offering plans in the ACA exchanges. CSRs are subsidies partly offset copays and deductibles for lower-income households enrolled in the ACA exchanges, and totaled $7 billion in 2017. Without CSR subsidies, insurers will likely raise premiums sharply or discontinue offering plans in the exchanges altogether. Any cessation of CSR funding will cause major disruptions in the ACA marketplaces.
Second, President Trump signed an executive order directing multiple federal agencies to review and reconsider current regulations limiting access to Association Health Plans (“AHPs”), Short-Term Limited-Duration Insurance Plans (“STLDI”), and Health Reimbursement Arrangements (HRAs). AHPs and STLDIs are often less costly than standard ACA exchange plans and other employer-sponsored insurance coverage because they can be structured so as to avoid providing certain ACA-mandated health benefits, cost-sharing limits, and other protections. HRAs allow employers to fund medical care expenses for their employees on a pre-tax basis, and the proposed changes would allow such funds to be used for medical expenses outside of ACA-compliant policies.
The practical effect of the contemplated changes to AHPs and STLDIs would be to allow people to leave more expensive ACA-compliant plans, which meet minimum essential coverage and benefit requirements, in favor of plans with limited coverage and cost-sharing protections in favor of cheaper premiums. This would allow younger, healthier people, without chronic health needs, to leave the general risk pools created by the ACA exchanges.
While the executive order touts the cost benefits of AHPs, STLDI and HRA plans, critics argue that changes to the risk pool will make it more expensive to insure the remaining participants, who will be older and sicker individuals who have no other options. This would drive up premiums for those remaining on the ACA exchanges. Furthermore, younger healthier individuals opting out of the exchanges would no longer have coverage for essential services like mental health, maternity, certain pre-existing conditions, and substance use disorder treatment, leaving coverage only for catastrophic medical events with high out-of-pocket limits and cost-sharing requirements. These gaps in coverage may lead to health care providers rendering more uncompensated care.
The executive order on AHPs, STLDIs and HRAs is not an immediate change in the law. Instead, it is an instruction to agencies to consider revising current rules in order to offer greater flexibility to consumers. Before and changes could go into effect, the agencies will have to first draft and publish proposed rules, solicit and respond to public comments, and then consider such comments before promulgating final rules. This “notice and comment” rulemaking will likely take months, meaning that this portion of the executive order is unlikely to affect 2018 plan options to be offered beginning in November 2017.
The loss of CSR subsidies and the increased use of plans which offer less than comprehensive benefits and cost-sharing protections has the potential to drastically remake the ACA. It remains to be seen whether such funding cuts and rule revisions will actually be implemented. In this respect, Attorneys General from nineteen states have filed a lawsuit against the Trump administration to stop the proposed defunding of CSR subsidies. Further, Congress could act to roll back the President’s executive orders. While it too early to fully understand how these changes will affect any particular plan or employer, Frantz Ward LLP’s healthcare attorneys can help you stay abreast of these changes and plan for future developments.