Trump’s October 12, 2017 executive order took aim at reducing health care costs by rolling back several key Obama-era administrative rules implemented pursuant to the Affordable Care Act (“ACA”).
Most significantly, the executive order looks to expand access to association health plans (“AHPs”). AHPs are a type of group-purchasing agreement where small businesses with a “commonality of interest” combine to self-insure or negotiate better terms on health benefits, thereby providing members the same negotiating power as much larger employers. Additionally, membership in an AHP may allow a small business to be considered a “large employer” for purposes the ACA, thus allowing small employers to circumvent certain ACA requirements. The order directs the Department of Labor to formulate new rules broadening the definition of commonality of interest, including a rule mandating that small businesses with similar geographical locations meet the commonality requirement—even if the businesses are separated by state lines.
The order also seeks to increase the maximum duration of short-term limited duration insurance (“STLDI”) from three months to twelve months. STLDI policies, typically purchased by recent graduates or those between jobs, are not subject to certain ACA minimum coverage requirements, such as the ban on charging higher premiums to those with pre-existing conditions. The Obama administration had previously reduced the maximum duration of STLDI policies from twelve months to three months over concerns that carriers were issuing STLDI policies to avoid ACA requirements.
Finally, the order aims to afford employers the ability to use health reimbursement arrangements (“HRAs”) to fund employee health care expenses regardless of whether the expenses stem from policies that fall short of ACA requirements. HRAs are a type of health-benefit plan in which an employer reimburses employee out-of-pocket health care costs using tax-advantaged funds.
Importantly, the executive order seems unlikely to have any substantive impact in the next year, as the administrative rulemaking process will not be complete before the ACA’s open enrollment period begins November 1. Additional updates will follow as new details emerge regarding the rulemaking process.