President Donald Trump signed an executive order Oct. 12 that the White House called a step toward “affordable health care solutions” through expanding the use of association and short-term health insurance plans and opening competition across state lines. The Colorado Division of Insurance responded, however, by saying it could be detrimental to the state’s health care landscape.
“Today is a big day,” said Sen. Rand Paul (R-Ky.), prior to the signing of the order. “President Trump is doing what I believe is the biggest free market reform of health care in a generation. This reform, if it works and goes as planned, will allow millions of people to get insurance across state lines at an inexpensive price.”
Paul said 28 million people were “left behind by Obamacare” and do not have insurance today.
“This specifically targets and will help people who don’t have insurance or for whom insurance is too expensive,” Paul said.
Vice President Michael Pence said, “Since Day 1 of our administration, President Trump has made it a top priority to rescue the American people from the disastrous failure of Obamacare. Everyday Obamacare survives is another day the American people struggle.”
Premiums have more than doubled since the Affordable Care Act began, Pence said, adding that in 2018, they are set to increase even more. He said nearly half of American counties will have a single choice through their exchanges in 2018.
“That essentially means they have no choice at all,” the vice president said.
President Trump said the order would be “very, very powerful for our nation and very good for a lot of people,” adding it was “a truly historic announcement.”
He said the process to repeal and replace the ACA was starting now.
“This is the first step to providing millions of Americans with Obamacare relief,” the president said, adding the executive order “directs the Department of Health and Human Services, the Treasury and the Department of Labor to take action to increase competition, increase choice and increase access to lower priced high-quality health care options. And they will have so many options.”
The president said the plan “will cost the United States government virtually nothing and people will have great, great health care,” adding expanding associations will provide small business owners the purchasing power of larger entities.
As for increasing competition by allowing insurance to be sold across state lines, the president said, “Insurance companies will be fighting to get every single person signed up and hopefully you’ll be negotiating, negotiating, negotiating and you’ll get such low prices for such great care. [This] should have been done a long time ago.”
In response, the DOI, part of the Department of Regulatory Agencies, issued a statement from Insurance Commissioner Marguerite Salazar, who began by saying “[e]xpanding association health plans and short-term health insurance without ACA protections will fracture the individual and small group markets. The limited benefits, the focus on the healthy at the expense of those with pre-existing conditions, and lack of regulatory oversight will cause problems for the health insurance market as a whole.”
Association plans tend to be affiliated with the small group market, according to Vincent Plymell, communications manager with the DOI. They can be set up by a group of businesses and provide insurance internally to members. Plymell said associations currently cannot be established in Colorado solely to provide insurance.
There are more than 100 associations in Colorado that have filed with the DOI, Plymell said, adding they often use brokers or third-party administrators to facilitate plans.
“As association plans would not have to follow most insurance regulations, especially at the state level, there would be limited oversight, especially concerning financial solvency,” Salazar said in her response to the president’s executive order. “Employers purchasing such plans for their employees will end up with serious questions about the value of these plans. Some employers may even find the coverage they were sold to be practically worthless, as they end up bearing the full cost of the services provided to their employees and dependents. With limited oversight of these plans, who will employers and employees turn to when they have problems with what they purchased? And the employers who maintain plans with better coverage for their employees will see their costs continue to climb.”
Just as the expansion of association plans could negatively impact the small group market, the expansion of short-term plans could hit the individual market, Salazar said.
“In the individual market, under this executive order, cheaper, less comprehensive short-term plans may be able to exclude people with pre-existing conditions and focus on healthy individuals,” the response said. “This creates an imbalance in the insurance market, where people will purchase short-term plans until they get sick, and then want to move to better coverage under the ACA plans, making those plans prohibitively expensive. And those with serious health conditions would remain on the exchanges, driving up premiums even more.”
But the executive order was not clear whether individuals could buy into association plans, Plymell said. He added that short-term plans, which fall within a three-month window, would be expanded to last 12 months and could be renewed. Those short-term plans, Plymell said, could exclude people with preexisting conditions.
“You’re creating a parallel market that’s serving the healthy population [because premiums are lower] and pulling them from ACA plans, leaving them with the sickest high-risk folks.”
Plymell said that uncertainty would drive exchange costs through the roof.
So is the order ACA sabotage?
“Seems to be that way,” Plymell said. “It’s an end around to repealing Obamacare. Congress couldn’t do it, so, at the least, this is way to try and make the [ACA] not work as well as it could.”
Plymell said the order shouldn’t impact open enrollment for Connect for Health Colorado, the state-run health insurance exchange. Open enrollment begins Nov. 1.
“Even White House officials said they don’t expect any sort of regulations or rule-making to occur this year,” Plymell said. “It will all be after [Jan. 1].”
Salazar said in her response that many details for the order “will need to be determined through Federal rulemaking actions. The Division has many questions about what these proposals really mean for Colorado consumers, but we will continue our mission of consumer protection by ensuring that Colorado laws are still followed when possible under this order.”