by Austin Madison
I have received numerous calls and emails on President Trump’s Executive Order on Healthcare, which was signed yesterday. No doubt, there will be a lot of political bantering, and mixed messaging on this order over the next few weeks, so it is important to have a high-level understanding of what the Executive Order entails.
There are two key parts to President Trump’s Executive Order.
Part 1: Immediately end government subsidies to Insurance Companies participating in the Public Exchanges. The key to focus on in this part, is that the Order ends subsidies to insurance companies, not low-income subsidy eligible individuals. Insurers, as part of the Affordable Care Act (Obamacare), received subsidies from the Federal government to help offset the financial burden insurance companies may receive by lowering premiums, co-pays, and deductibles for subsidy eligible individuals purchasing health insurance through the Public Exchanges. President Trump has been paying these subsidies to insurance companies on a month-to-month basis this year, which caused most participating insurance companies to think that these subsidies could possibly go away. So what does this mean for individuals purchasing their health insurance through the Public Exchanges? For lower-income subsidy-eligible individuals, this really does not mean much. The insurance companies must continue to provide discounts to these consumers. Premium may rise slightly, but changing to another plan may mitigate any potential small increase that subsidy-eligible consumers may experience. However, individuals, whose income is too high to qualify for subsidies, may experience a significant increase in their individual health insurance premium for 2018. Most insurance companies were preparing for subsidies to go away, and as a result asked for regulatory approval for rate increases in 2018. The Kaiser Family Foundation 2017 August Analysis, states that Insurer rate increase requests ranged from 3-23% for 2018 premiums. Primarily, these rate increases will take place in the “Silver” plan level on the public exchanges, as subsidy eligible individuals must sign up for silver plans to receive a subsidy, but some insurers may also spread the increases across bronze and gold plans with the majority of the increase affecting silver plans. Individuals not qualifying for subsidies could find rate relief by shopping for either bronze or gold level plans, or purchasing individual health insurance through non-exchange insurers. It is important to note that this part of the Executive Order only applies toward individual health coverage on the Public Exchanges, and that subsidy-eligible individuals are not losing their coverage or insurance premium subsidies. However, it should not come as a shock if health insurance carriers increase rates across their fully-insured group health plans to help offset for potential loss. This is conjecture only, and nothing solidifies that group rates for fully-insured plans would also be affected, but do feel that this is a strong possibility. As a result of the order more insurance companies may look for ways to exit the public exchanges, which could ultimately cause the Public Exchanges (the foundation of Obamacare) to implode.
Part 2: Labor Department to Study Association Plans for individuals and small employers. President Trump also executed an executive order asking the Labor Department to begin studying the impact of allowing individuals and small employers the ability to purchase health insurance through nationwide associations. Ultimately, this would allow health plans, through associations, to be purchased across state lines. There is not a lot of detail behind this Executive Order yet, but most analysts believe this would allow associations to pool risk and offer plans that may not meet all original ACA requirements. The intent would be to provide individuals more choice – choosing between ACA/Public Exchange plans, and potentially Association plans, that would not have to meet all ACA requirements, and as a result provide less expensive major medical coverage. There is not a lot of detail around this order yet, but one would assume the idea is to allow the market to dictate what individuals want/need for their health insurance, and allow associations, that have large memberships, to offer plans that better meet the demand of their members.
In summary, there will obviously be a lot more detail and challenges to these Executive Orders over the coming months and potentially year (specifically concerning Association Plans). Employers will most likely continue to migrate from fully-insured plans to self-insured alternative funding arrangements, as they fear rate impact on group plans from individual premium increases. Associations most likely will start polling membership for interest, and begin kicking the tires on solutions for individuals and small employers.
Austin Madison is senior vice president with The Crichton Group, and independent insurance and risk management firm. Madison joined Crichton in 2007 and has been in the insurance industry since 2005. He has served on numerous industry boards and advisory councils within the insurance and employee benefits arena. For more information, go to thecrichtongroup.com or email Austin at firstname.lastname@example.org.