*Photo courtesy Gage Skidmore
Last Thursday, President Donald Trump signed an executive order that, according to the Washington Post, is “intended to circumvent the ACA by making it easier to buy different types of health plans with lower prices but also fewer benefits and protections.”
There are three key highlights at the heart of this executive order. These highlights involve Association Health Plans (AHPs), Short-Term, Limited Duration Insurance (STLDI), and Health Reimbursement Arrangements (HRAs).
All of the changes proposed by this executive order are designed to promote more choice and access to health care coverage. Especially for small business owners and employees.
Association Health Plans
Under association health plans, small businesses can form and join associations, which offer insurance to members. These associations typically form through particular professional, trade, or interest groups.
Trump’s executive order also includes direction for the Secretary of Labor. The order urges the Secretary to consider allowing these association plans to be sold across state lines. These transactions are something that has been against ACA regulations, until this point.
The hope of this directive is that consumers have more choice than they did in the past. Selling plans across state lines could give workers a broad range of insurance options at lower rates in the large group market.
Still, it’s important to know that, while the order will make it easier to form these associations, they will always need an insurance company willing to back the group. Because these arrangements typically experience high volatility, many carriers refuse to support them.
Short-Term, Limited Duration Insurance
Under the Obama administration, short-term health insurance plans were limited to a three-month duration. The executive order pushes for the expansion of these plans to cover up to a year.
It’s also important to know what regulations short-term insurance plans follow. These plans are not subject to the same ACA requirements that other insurance policies are. Regulations such as essential benefits, mental health coverage, maternity care, and full prescription coverage are no longer required.
Many experts believe that the expansion of short-term plans could result in a rise in premiums for exchange plans. And then a subsequent departure form exchange plans to short-term health plans.
Health Reimbursement Arrangements
Health reimbursement arrangements (HRAs) are commonly referred to as health reimbursement accounts. These accounts help you pay for covered health care services and other eligible medical expenses. HRAs, as opposed to other savings accounts, are controlled by the employer, not the employee.
The new executive order, according to Employee Benefits News, “allows for employers of all sizes to create an HRA and pay for employees to get individual policies outside of the employer, on a tax-free basis.”
Currently, HRAs are only applicable for retiree health, or small-group health plans. An increase in the use of HRAs could give employers more flexibility in covering workers. For example, HRAs could be used to provide funding for part-time workers to purchase insurance on the individual market.
It’s important to know that HRA changes aren’t subject to implementation for at least 120 days.
Challenges to Come?
CNBC has reported that if the executive order continues, it could be in violation of the Employee Retirement Income Security Act. According to the report, states could argue that through the executive order, could violate ERISA. ERISA is the piece of legislation which governs large-group health plans.
Legal experts say states might contend that associations formed to buy insurance, are not employers under ERISA. In the past, under ERISA, federal regulators have typically required that members of these associations have “a high degree of common interest beyond just buying insurance.”
It’s important to understand this new executive order, and how it could impact health insurance. Still, it’s just as important that you keep in mind until further guidance is issued or legislation is signed, all current ACA requirements remain in effect, including penalties for noncompliance.
Make sure to check in with The Olson Group for more analysis regarding this executive order, as further information and legislation is released.