After failing to achieve a legislative solution to "repeal and replace" the Patient Protection and Affordable Care Act (ACA), President Trump issued an executive order (EO) on October 12, 2017, designed to promote “healthcare choice and competition” by modifying certain healthcare insurance regulations. In the absence of congressional action, according to the White House press release, this EO takes “the first steps to expand choices and alternatives to Obamacare plans and increase competition to bring down costs for consumers.” The cornerstone of this White House effort is the promotion of Association Health Plans (AHPs) allowing employers to join together to purchase insurance across state lines.
Expanding access to AHPs has been a longstanding goal of many Republican lawmakers. In March 2017, the House passed the Small Business Health Fairness Act (H.R. 1101), which was introduced by Rep. Sam Johnson (R-TX) and Rep. Tim Walberg (R-MI). On the other side of the Capitol, the Senate unsuccessfully tried to pass an ACA “repeal and replace” bill that included a provision expanding AHPs. With those congressional efforts having failed, President Trump has turned to executive branch action to try to achieve similar goals.
The EO directs the Secretary of Labor (DOL) to issue proposed regulations or guidance expanding access to health coverage by allowing more employers to form AHPs. The EO calls upon the DOL to consider, to the “extent permitted by law and supported by sound policy,” expanding its interpretation of ERISA to facilitate the purchase of health insurance across state lines through AHPs. The EO specifically references broadening the interpretation of the conditions that satisfy the commonality-of-interest requirements with respect to the definition of an "employer" under section 3(5) of ERISA. The objective of this broader interpretation is to allow trade associations, for example, to offer health insurance to employees of member companies. By potentially making it easier for employers to band together to create a larger risk pool, proponents of AHPs contend that workers could have access to a broader range of insurance options at lower rates in the large group market.
A second pillar of the president’s proposal to increase healthcare choice and competition is expanding the availability of short-term, limited‑duration insurance. This short-term coverage is not subject to the ACA’s insurance market reforms and is generally less expensive than more robust ACA-compliant plans. Existing regulations limit this short-term coverage to under three months. However, the EO envisions extending this period. It calls upon the Secretaries of Treasury, Labor, and Health and Human Services to consider proposing regulations or revising guidance within 60 days to allow such insurance to cover longer periods and be renewed by the consumer.
Finally, the EO seeks to expand the availability and permitted uses of Health Reimbursement Arrangements (HRAs). HRAs are employer-provided accounts that reimburse employees for healthcare expenses, including deductibles and copayments. Funds contributed to an HRA are not treated as taxable income. The EO directs the Secretaries of the Treasury, Labor, and Health and Human Services to propose regulations or revise guidance to allow more flexibility in their use. As outlined in the EO, HRAs could be used in conjunction with non-group coverage, a reversal of the Obama administration’s position.
Turning to administrative action to reshape the ACA and health insurance system nationwide is an easier path than the legislative path proved to be, although it is still a relatively time-consuming process. The EO expressly directs the Departments to consider and evaluate public comments on any regulations proposed under the EO, a process that will take a number of months and open the proposal up to praise and likely criticism. The details of these changes await regulatory action. The extent to which regulators can implement the changes called for in the EO within the current statutory framework will no doubt be scrutinized. Taken together, the changes outlined in the EO may only be the first step in reshaping the health insurance market nationwide, but it is a significant one.
We will continue to monitor developments in this area.