Choice Stories

October 12, 2017

What Small Businesses Need to Know About Trump Executive Actions, Potential Return of Association Health Plans

Thus far in 2017, Republicans in the U.S. House of Representatives and U.S. Senate have been unsuccessful in reaching a deal with Democrats to overhaul the Affordable Care Act (ACA). Now, the Executive Branch is taking actions on its own to undercut the ACA.

President Donald Trump signed an executive order during the week of October 9th that will resurrect the concept of association health plans, enabling small businesses in the same state and the same line of business to band together to secure health coverage for their employees.

While the idea on its face sounds attractive because of the potential lure of lower costs, health reform experts say the move will likely erode the consumer safeguards of the ACA because the association plans will not have to provide the essential health benefits called for under health reform. Instead, they will only have to comply with the state guidelines where the plan is filed, not the more-restrictive guidelines that apply in some states.

Critics have suggested it will create a “race to the bottom” as health insurers file stripped-down plans in states with the fewest regulations when it comes to what’s covered. In turn, these less generous plans will likely draw healthier people out of the traditional health insurance market with lower prices, leaving full-featured Obamacare plans with sicker enrollees, which could further drive up premiums for those with pre-existing conditions.

The Wall Street Journal reported the executive order would also loosen rules on short-term health insurance coverage, which previously was offered as a temporary solution for those with a gap in their insurance – perhaps due to an interruption as a result of a job loss or a move to a new job (and a waiting period before new coverage begins).

Exempted from the ACA’s “essential health benefits” requirements, future association health policies could omit coverage for pre-existing health conditions, according to Kaiser Health News. These short-term plans, formerly restricted to 90 days or briefer periods, could be expanded to offer protection for up to 364 days, exposing insureds to greater out-of-pocket costs and reduced benefits.

Combined with the cutback in funding for advertising during the shortened ACA enrollment period for 2018 – and a reduction in assistance to help enroll those who need coverage – the new executive order could ease the path to future congressional action on repeal.

The ACA as it exists currently allows for insurers to sell plans across state lines; however, as reported by the Los Angeles Times, no insurance company has taken advantage of this opportunity. Fourteen states have considered interstate compacts that would allow cross-state insurance sales and three states (Georgia, Kentucky, and Maine) have passed laws allowing interstate sales.

Setting up provider networks that extend beyond state borders is pricey, time-consuming, and a potential large risk for insurers. Health insurers have traditionally opposed the idea of cross-border plan saying it will fragment and destabilize the small group market – driving up premiums for small businesses.

Former Centers for Medicare & Medicaid Services (CMS) administrator Andy Slavvit called the latest proposal “synthetic repeal” that will likely “butcher the ACA” beyond recognition.

The White House action follows steps taken earlier in October to roll back the birth control mandate of the ACA. On October 6, 2017, the Trump administration moved to expand the rights of employers to deny insurance coverage for contraception to women on the basis of the employer’s religious liberty.

The new rules broaden the range of employers and insurers that can now invoke religious or moral beliefs to avoid complying with the ACA requirement that birth control pills and other contraceptives be covered by most insurance plans as part of the ACA’s preventive care benefits.

The U.S. Department of Health & Human Services (HHS) said in an announcement that the birth control coverage change will impact only a small percentage of the 165 million women in the U.S.; however, Cecile Richards, president of the Planned Parenthood Federation of America, said in a statement, “With this rule in place, any employer could decide their employees no longer have health insurance coverage for birth control.”

Indeed, employers do not have to file anything with HHS or other agencies to stop offering birth control coverage. They simply have to send notice to employees of their decision.

The number of women who paid for contraceptives fell from around 21 percent in 2012 to less than four percent by 2014, according to the independent Kaiser Family Foundation. Fifty-five million women were covered by policies that provided no-cost contraceptives in 2015.

The proposed new relief from federal ACA compliance will not exempt employers from complying with state-mandated requirements. Eight states have laws requiring no-cost contraception be available to employees, while another 20 states require coverage of prescription contraceptives with employees sharing in the cost.

Several state attorneys general, including California’s Xavier Becerra, have announced plans to try to block the contraception policy change. The American Civil Liberties Union has also filed a complaint in the U.S. District Court for Northern California.

The attorney general and the ACLU allege the new riles violate the First Amendment by discriminating against women and favoring the rights of certain religious views without adhering to correct government procedures.

The state also asserts the new rules will have “immediate and irreparable harm on the state of California” by potentially leaving millions of women without birth control access, which could further increase costs for state-funded programs.

We will continue to follow the matter and will share updates on the legal challenges to its implementation.