On October 12, 2017, President Trump signed his promised Executive Order on Obamacare, the “Presidential Executive Order Promoting Healthcare Choice and Competition Across the United States.” Here is what the Executive Order on Obamacare does and does not do:
The Executive Order on Obamacare announces the current administration’s policies.
The Executive Order on Obamacare outlines three main areas where President Trump plans to influence the health insurance markets.
Association Health Plans (AHP)
The Executive Order on Obamacare seeks to create what are known as “Association Health Plans” (AHP). These plans would allow multiple small employers to band together and form larger risk pools so that they could, in theory, purchase health insurance on more favorable terms. Risk pools spread financial risks evenly among a large number of contributors, rather than confining risks to an individual him. This allows individuals to transfer their individualized risk into an insurance policy, in exchange for payment of a premium. For a very detailed explanation of risk pools, click here.
Presently, health insurance policies are priced differently in large group and small group markets. The Executive Order on Obamacare complains that:
“Large employers often are able to obtain better terms on health insurance for their employees than small employers because of their larger pools of insurable individuals across which they can spread risk and administrative costs. Expanding access to AHPs can help small businesses overcome this competitive disadvantage by allowing them to group together to self-insure or purchase large group health insurance.”
The Executive Order then directs the Secretary of Labor to propose rules expanding the “commonality‑of-interest requirements” under Section 3(5) of the Employee Retirement Income Security Act (ERISA) in order to increase the ability of small employers to band together. Under Section 3(5), an “employer” is defined to “include a group or association of employers acting for an employer.” By expanding what are considered “common interests” among different employers, the theory is that more small employers can band together and purchase large group insurance as a single, large group.
Short-Term Limited Duration Insurance (SLTDI)
Short term insurance is exactly what it sounds like: insurance policies intended for a short term only, rather than the standard yearly policy. These are typically aimed at groups such as recent college graduates, or new employees waiting for health insurance benefits to kick in. The Executive Order on Obamacare complains that the duration of these plans is too short:
“The previous administration took steps to restrict access to this market by reducing the allowable coverage period from less than 12 months to less than 3 months and by preventing any extensions selected by the policyholder beyond 3 months of total coverage.”
Rather than the current 3-month maximum, the Executive Order on Obamacare directs the Secretaries of the Treasury, Labor, and Health and Human Services to propose rules and “consider allowing such insurance to cover longer periods and be renewed by the consumer. This is to carry out the Executive Order’s policy announcement that such plans can be “appealing and affordable alternative to government-run exchanges for many people without coverage available to them through their workplaces.”
Health Reimbursement Arrangements/Accounts (HRA)
Health Reimbursement Accounts are accounts funded by an employer that reimburse employees on a tax-free basis for qualified health expenses. These are similar to Health Savings Accounts, which are funded by an individual on a tax-free basis (and to which employers may contribute small amounts). Because employers directly fund HRA’s and reimburse the employees, they can sometimes look like very small, self-funded employer sponsored health plans. They are also exempt from many of the regulations under Obamacare. Because of this, the Executive Order on Obamacare announces a policy in favor of expanding HRA’s as an alternative or supplement to traditional health insurance:
“Expanding the flexibility and use of HRAs would provide many Americans, including employees who work at small businesses, with more options for financing their healthcare.”
To that end, the Executive Order directs the Secretaries of the Treasury, Labor, and Health and Human Services to propose rules “to increase the usability of HRAs, to expand employers’ ability to offer HRAs to their employees, and to allow HRAs to be used in conjunction with nongroup coverage.”
The Executive Order on Obamacare does not repeal Obamacare
Legislative efforts to repeal Obamacare failed, and this Executive Order does not cure that failure. As discussed above, the Executive Order on Obamacare directs various departments to consider and propose rules (1) expanding the definition of “employer,” (2) extending the duration of short term insurance, and (3) expanding the availability of HRA’s. Other than directing these departments to propose new rules, the Executive Order on Obamacare announces policy positions only. It does not directly repeal or revise any rules under Obamacare.
Check back in 60-120 days to learn how far the Executive Order on Obamacare will reach.
The Executive Order on Obamacare gives the departments 60-120 days to propose rules regarding each of the three areas discussed above. Under the Administrative Procedure Act, those proposed rules will be subject to a period of public comment before they become effective. See 5 U.S.C. § 553(c).
Once received, the departments will spend another several months reviewing the comments before they they announce their final rules (and any revisions to the proposed rules).
Fun fact: Any person, including you, can issue written comments to the relevant department once it proposes rules. If you have an opinion, make it known.
So, for now, Obamacare remains in place without any changes to the legislation or the rules that have been promulgated under it. The Executive Order on Obamacare did not change anything in that respect, and legislative efforts at repeal have failed. We’ll check back in about two months after the departments issue their proposed rules to consider what impact they will have on Obamacare.