Trump’s executive order has a history
President Trump signed an executive order Thursday expanding what’s known as “association health plans.” But 25 years ago, federal watchdogs concluded such plans ripped off hundreds of thousands of Americans by refusing to pay their medical claims while violating state insurance laws and even criminal statutes.
Back in 1992, the Government Accountability Office issued a scathing report on these multiple employer welfare arrangements (known as MEWAs; they’re pronounced “mee-wahs”) in which small businesses could pool funds to get the lower-cost insurance typically available only to large employers.
These MEWAs, said the government, left at least 398,000 participants and their beneficiaries with more than $123 million in unpaid claims between January 1988 and June 1991.
Furthermore, states reported massive and widespread problems with MEWAs. More than 600 plans in nearly every U.S. state failed to comply with insurance laws. Thirty-three states said enrollees were sometimes left without health coverage when MEWAs disbanded.
In one of the most egregious cases, a California-based MEWA called Rubell Helm Insurance Services enrolled thousands of Florida residents without their knowledge but failed to pay any large claims.
“MEWAs have proven to be a source of regulatory confusion, enforcement problems and, in some instances, fraud,” the GAO wrote at the time.
Of course, President Trump described such plans quite differently during his announcement after signing the executive order aimed at making it easier for association health plans to form, operate across state lines and duck coverage regulations under the Affordable Care Act.
Critics of the action include state insurance commissioners and much of the health industry because, they argue, the new plans would draw healthy customers out of the ACA marketplaces and increase costs for sicker patients.
Trump said the move was one of many he will take to weaken the impact of Obamacare after Republicans in Congress failed in multiple attempts to repeal and replace the law.
The effects of his executive order could be different from what the president anticipates.
Association health plans — which are basically MEWAs that are tied to a trade association (such as the U.S. Chamber of Commerce) — have been around for a long time, but had to operate in a single state and were subject to ACA regulations under Obama-era rules.
Trump is seeking to broaden their ability to function by instructing a trio of Cabinet departments to rewrite the federal rules governing them.
In these arrangements, a trade association acquires health coverage that small businesses, individuals or nonprofits could buy into.
Trump and some Republicans are billing these association health plans as a way to offer lower-cost options to consumers amid an otherwise toxic ocean of Obamacare regulations.
By purchasing insurance through associations, small businesses and individuals could potentially duck the ACA’s coverage requirements — including its 10 “essential health benefits” — that don’t apply to large group plans.
Republicans say this will lead to lower-cost health insurance and the ability of Americans to choose from a broader array of insurance options that better fit their needs.
Of course, the details of the anticipated executive order will matter. One of the biggest problems with association plans — according to the GAO — is that they often flew under the radar of state insurance regulators.
“At the heart of regulation and enforcement problems is the fact that state regulators are often constrained by the inability to identify MEWA until after MEWA problems occur,” the report says.
Sometimes plans tried to duck regulations entirely, the agency found. Forty-two states said MEWAs had claimed exemption from state laws under the Employee Retirement Income Security Act (ERISA) of 1974, which had allowed MEWAs in the first place. Courts mostly sided with the states in these legal battles, but they still cost states large amounts of staff and time.
These problems are partly why the Obama administration actually cracked down on association health plans as it was implementing the ACA. In 2011 guidance, the Department of Health and Human Services said association plans must comply with the health-care law’s consumer protections just like any other individual or small group plan.
Yet Trump is now poised to rewrite the rules, turning to the 43-year-old idea of association health plans — which the government has found some serious problems with in the past — as his way of reshaping Obama’s ACA.
“What is old is new again,” as one health-care consultant told me.