The Trump administration is taking its first steps to put its imprint on the Affordable Care Act, reversing plans to withhold tax refunds this year from Americans who flout an insurance requirement in the law while proposing a series of rule changes to encourage insurers to remain in ACA marketplaces.
The Internal Revenue Service has revoked an Obama-era instruction to taxpayers that was taking effect during the current filing season as a way to further compliance with the ACA’s requirement that most Americans carry health insurance or pay a tax penalty. Under the instruction, the IRS had announced that it would no longer process tax returns for people who fail to send a notice with their returns that they have insurance, are exempt from the requirement or are paying the fine.
Instead, the agency said in a statement on Wednesday, tax returns will be processed as always, even for individuals who do not provide the required information. The IRS said the decision, made earlier this month but not previously publicized, was in line with an executive order that President Trump signed hours after his inauguration, giving agencies broad authority to lighten the burden of federal rules under the ACA.
The IRS confirmed the change on the same morning that Health and Human Services officials proposed a set of rules to help protect insurers and shore up ACA marketplaces in the short term while Republicans work on demolishing the law. The proposal drew swift praise from the insurance industry and condemnation from consumer advocates and congressional Democrats.
Taken together, the moves by the IRS and HHS demonstrate the balancing act the fledgling administration is attempting with the 2010 law, which remains one of Trump’s top targets. The administration is eager to undermine as much of the ACA as it can through executive actions, but it also is eager to stave off any abrupt collapse of the insurance marketplaces covering about 10 million people — and to minimize any political fallout for the GOP.
While allowing tax refunds to keep flowing, the IRS change does not affect the actual penalty most people face for not having health coverage, which can be eliminated only through a new law. The penalty is $695 per adult or 2.5 percent of a household’s income, whichever is greater.
The proposed HHS rule would make it harder for consumers to buy health coverage outside of the law’s regular enrollment periods, give insurers power to deny new coverage to people late in paying their premiums, and create more rigorous checks of applicants’ eligibility.
At the same time, the changes would eliminate federal reviews of whether health plans in the ACA marketplaces have enough doctors and other providers of care, delegating the task to states. And by lowering how much insurers must pick up for a specific benefit package, the changes would allow them to sell plans with higher deductibles.
The proposal aligns with concerns voiced by the insurance industry long before the Trump administration assumed power — concerns that have prompted some major insurers to stop selling coverage or to curtail their participation in the ACA’s federal insurance exchange or separate, similar marketplaces run by states.
Those concerns center, in essence, on the fact that the ACA’s “risk pools” tend to have older and less healthy customers than insurers had expected and thus are more expensive to cover. Insurers complain that some customers wait to buy coverage until they are sick and in need of medical services, then drop out once they have gotten care.
On Tuesday, Humana announced that, after cutting back on its ACA participation in 2017, it plans to fully withdraw from the marketplaces next year. The new rule is an attempt to deter others from following suit,
Aetna chief executive Mark Bertolini predicted at a forum on Wednesday that “you will see a lot more withdrawals this year of plans,” though he did not address the proposed rule changes. Others in the industry had a more optimistic reaction.
“These proposals . . . are a good start toward improving the functioning of the marketplace, so that any longer-term reforms can begin on a better footing,” said Alyssa Fox, senior vice president for policy of the Blue Cross Blue Shield Association. As other insurers have withdrawn, its members are the only insurer available in about one-third of the nation’s marketplaces.
But Andy Slavitt, the Obama administration official who oversaw the Centers for Medicare and Medicaid Services, the agency carrying out much of the ACA, predicted that the altered rules would “raise deductibles, reduce access to physicians and put limitations on the ability for people to get coverage.”
Ron Pollack, executive director of the advocacy organization Families USA, called the proposed rule “a huge step backwards.” The changes “are actually going to make health coverage and care a whole lot more expensive for consumers,” he said.
Parts of the proposed rule would strengthen steps the Obama administration already had taken. For instance, that administration last year limited the circumstances under which people could qualify for “special enrollment periods” outside the normal sign-up season. The new proposal would require greater proof of eligibility for such exceptions. It also would require the 39 states relying on the federal HealthCare.gov website to screen the eligibility of all applicants instead of just half of them.
Other elements would markedly shift course. Last year, the Obama administration expanded upon a regulation to try to ensure that ACA plans offer their customers enough providers nearby. Under the Trump administration’s change, there would be no federal review of health plans’ networks.
And insurers could refuse to renew coverage for customers who are behind on their bills. That change would eliminate a three-month grace period that consumer advocates say has been especially helpful to people who struggle to pay their ACA premiums.
Starting in 2018, the rule also would shorten the annual ACA enrollment period from three months to six weeks.
The administration is providing an unusually short window — 20 days — for public comment on the rule.