President Trump has made a lot of promises on health care.
Somehow, though, I don’t remember him promising stadiums of cheering fans that he’d take away protections for preexisting conditions, increase deductibles, spike premiums, eliminate basic coverage requirements and, more generally, destabilize the individual health-insurance market.
But that is what he said he’d do Thursday, when he signed an executive order on health care.
Those aren’t the precise words he used, of course. But they are the consequences of the policy bombs he wants to set off in two relatively obscure corners of the insurance market: association health plans and short-term health plans.
What are these plans, you might ask?
Under current law, an association of small businesses (such as a group of law firms) can band together and market insurance to members. These association health plans must abide by all the consumer protections of the Affordable Care Act. They are also subject to the insurance laws and rules of the state in which they’re sold.
But under Trump’s executive order, depending on what the final regulations say, an association could exempt itself from lots of federal Obamacare requirements (such as essential health benefits), and choose any state to be its regulator (regardless of where its members are).
Meaning if it wanted to be regulated by a state that doesn’t require coverage of prescription drugs or cancer treatments, it could.
This would not only rob states of their sovereignty, which Republicans have so often claimed to champion, but also create a race to the bottom. Pursuing ever-lower premiums, every association would likely incorporate in the most Wild-West-like state around, in the way that credit card companies tend to domicile in South Dakota.
The administration has also left open the possibility that individuals — and not just small employers — could buy into these association plans, further siphoning people out of the individual markets.
What about those “short-term health plans”?
These can sometimes serve a legitimate purpose — a stopgap to tide you over for the summer until the school year starts, for instance.
But after Obamacare passed, there was a proliferation of scammy “short-term” plans that weren’t so short term. Some lasted 364 days! Why?
“They walked and talked like traditional insurance, but as long as they were less than 12 months, they were not technically considered ‘insurance,’ ” explains Sabrina Corlette, a research professor at Georgetown University’s Health Policy Institute.
As such, the plans weren’t subject to Obamacare consumer protections such as essential health benefits and guaranteed issue to people with preexisting conditions. Insurers could offer skimpy plans and cherry-pick the cheapest, most profitable enrollees.
The Obama administration ultimately closed this loophole by determining that short-term plans must be shorter than three months.
With his executive order, Trump seeks to re-lengthen those plans.
Both of these changes, the president boasts, would give consumers more “choice.” Which sounds swell. But insurance markets do weird, counterintuitive things when you introduce more choice.
Two main problems result.
One is that, absent minimums for quality and regulatory oversight, lots of Americans are likely to get conned into plans that cover almost nothing (or that even turn out to be insolvent). These are sometimes called min-med or “buffalo plans,” because they pay out pretty much only if you’re trampled by a herd of buffalo.
The bigger problem is called adverse selection.
That’s the idea that healthy people will sort into low-cost, bare-bones plans, while relatively costly people will stay in the more generous, Obamacare-compliant plans, which can’t legally turn customers away. Premiums in Obamacare plans would then spike, driving out more relatively healthy people, further driving up premiums, and so on.
In the end, the whole individual market falls apart, leaving us with basically the pre-Obamacare system. Even those healthy people — even if they stay healthy! — have no real options.
The only good news is that Trump’s executive order doesn’t have force of law. It’s a set of instructions for Cabinet members to come up with further regulations. These may turn out to be weaker than Trump has implied, especially because some elements of the order appear legally dubious. They also won’t be ready in time for the upcoming 2018 open enrollment season.
In the meantime, though, Trump’s executive order will spook a lot of insurers, which have only just recently found their footing in the existing system. And it’s also likely to confuse consumers, which could depress enrollment and destabilize markets further.
Which would be pretty much on brand for this nihilistic president: When you can’t come up with a new system that works, just blow up the old one.