Larry Levitt is senior vice president of the Kaiser Foundation.
Most observers of health policy news would be excused for being more than a bit confused about the current state of the Affordable Care Act.
The Republican effort to repeal and replace the ACA last year stalled, suggesting that the law was here to stay. Then, seemingly out of the blue, the ACA’s individual mandate penalty was repealed as part of the tax bill, prompting President Trump to declare that “we have essentially repealed Obamacare, and we’ll come up with something that will be much better.”
The individual mandate is certainly an important part of the ACA, encouraging healthy people to sign up for insurance. Without it, premiums for people who buy their own insurance will rise, and more people will be uninsured. But, the heart of the law — expanded coverage through Medicaid, protections for people with preexisting conditions and premium subsidies for lower-income people — is still in place.
Meanwhile, without much fanfare, a surprisingly large number of people signed up for coverage in the ACA’s marketplace during the recent open-enrollment period. Enrollment was only about 5 percent below last year’s total, despite the sign-up period being half as long, a 90-percent reduction in federal outreach and discussion of the individual mandate being repealed (even though that doesn’t take effect until 2019).
The ACA is not only not dead, it appears to be very much alive.
Nevertheless, the administration continues to use its discretion to institute policies it favors, many of which will weaken the ACA. The latest example is a proposed regulation to expand association health plans, following an October executive order by Trump. The order also called for an expansion of short-term health-insurance plans, though regulations have not yet been issued to implement that provision.
Associations — which include trade and industry organizations and business groups such as the Chamber of Commerce — have offered health insurance to small businesses and individuals for a long time, but their role has been circumscribed by federal and state regulations.
Currently, associations have to exist for a purpose other than providing health insurance — a requirement that would be eliminated by the proposed regulation. And, associations that offer coverage to small businesses or individuals have to follow ACA rules, which require coverage of 10 categories of essential benefits, and limit what factors can be considered in charging premiums.
The new regulation would largely exempt association plans from these rules, allowing them to offer insurance to small businesses and sole proprietors that is cheaper but also covers less.
Surprisingly, the regulation includes non-discrimination rules that would require associations to accept all applicants, including those with preexisting conditions, and sicker people could not be charged higher premiums than healthy people. However, premiums could vary by a host of factors prohibited or limited by the ACA, including gender, age and industry.
While associations could not overtly discriminate against people with preexisting conditions, there are covert ways in which they could do so. For example, one would expect insurance companies to welcome an association of fitness instructors, but not so much an association of volunteer firefighters. And there is no prohibition against redlining, so association plans could avoid entire communities with high health needs.
Most significantly, association plans could exclude or limit services needed by many people with preexisting conditions — such as mental health and substance-use treatment, maternity care or expensive specialty drugs — making coverage cheaper for healthy people but unattractive to those who are sick.
States, which have traditionally regulated insurance markets, may have more limited ability to oversee these association plans.
The expansion of these association health plans threatens to create a parallel insurance market that offers fewer consumer protections than the ACA-regulated market for individuals and small businesses. This parallel market is likely to attract healthier people, leaving the ACA market with a sicker pool of enrollees and higher premiums.
The desire to make less expensive insurance available to middle-class consumers who buy their own insurance and are not eligible for ACA subsidies is understandable. Premiums have been rising in the individual insurance market, in part in response to actions taken by the Trump administration. While lower-income people are protected from premium increases by federal subsidies, the middle-class is increasingly getting priced out of this market.
Association health-insurance plans would offer lower premiums, but this would come at the expense of skimpier coverage. And middle-class consumers with preexisting conditions would be stuck paying more for ACA marketplace coverage that covers the benefits they need.
These changes would wound the ACA insurance marketplace, but they are unlikely to make it collapse. Also, the vast majority of people who are covered by large employers, Medicare or Medicaid are unaffected by this. Still, we should expect to see continued efforts to undercut the ACA administratively, even if Congress abandons any effort to repeal it through legislative means.
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