Yesterday, Thursday, October 12th, on the heels of the recent and repeated failures to repeal and replace the Affordable Care Act (“ACA”), President Donald Trump signed an executive order nominally aimed at increasing competition in the healthcare marketplace, but widely believed to be driven by a desire to undermine the ACA. The executive order broadly tasks the Labor Department with changing the current policies on the accessibility of certain healthcare plans. The coming policy changes are speculated to expand the market for healthcare plans that are exempt from many of the regulations under the ACA. Such healthcare plans are known as Association Health Plans (“AHPs”).
AHPs allow small businesses and some individuals to band together and obtain health insurance in a similar manner as larger businesses do for their workers. The order, however, focuses mostly on small businesses. It is believed that these “new” AHPs will most likely provide less benefits than traditional AHPs and will not follow the consumer protection regulations set forth in the ACA.
Supporters of the executive order claim that expanding the market for AHPs will result in lower consumer healthcare costs. However, skeptics are concerned that the probable results of the executive order will be the creation of a divide in the health insurance marketplace between (i) healthy individuals for whom cost savings are the primary motivation for the selection of an AHP; and (ii) seniors and/or individuals with pre-existing conditions for whom comprehensive coverage is the primary motivation for the selection of an ACA-regulated healthcare plan. Because of this divide, ACA-regulated plans will likely find themselves with an older and sicker membership with significantly greater and more expensive healthcare needs. To provide healthcare benefits to this membership population, the ACA-regulated plans will likely raise their premiums to offset their increasing costs. In short, the executive order may ultimately deprive seniors and individuals with pre-existing conditions of affordable access to healthcare.
While the executive order is certainly a significant policy move, some experts are already anticipating a legal challenge to the President’s action, believing that the federal government may have overstepped its authority under the Employee Retirement Income Security Act (“ERISA”), a federal law that grants states the right to regulation AHPs. This potential challenge will be something to keep an eye on as the Labor Department considers regulations under the executive order.