Trump’s ex­ec­u­tive hit on the ACA

The Washington Post - - WASHINGTON FORUM - cram­pell@wash­post.com CATHER­INE RAMPELL

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 “short­term” 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.

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