President Trump Signs New Executive Order To Loosen Insurance Regulations

by King & Spalding
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Following multiple failed attempts by the Republican-led Congress to repeal the Affordable Care Act (ACA), on October 12, 2017, President Trump took unilateral action signing an executive order aimed at expanding choices and alternatives to plans sold on the ACA marketplace. Specifically, the executive order directs the Trump administration to evaluate the expansion of Association Health Plans (AHPs), Short-Term, Limited Duration Insurance (STLDI) plans, and Health Reimbursement Arrangements (HRAs). President Trump believes that these changes will provide “access to more affordable health care options” and “increase the healthcare choices for millions of Americans.”

First, the executive order directs the Secretary of Labor to consider new regulations to expand the use of AHPs. AHPs allow businesses or industry groups to join together to with the goal of increasing their purchasing power to receive lower premiums in the insurance market. Under current law, AHPs can either be fully insured and subject to State insurance regulations or be self-funded and subject to the Employee Retirement Income Security Act of 1974 (ERISA). AHPs are also regulated differently depending if they are “small group” or “large group” plans. An AHP is considered a small group unless the AHP can show a “commonality of interest” between the associate plans and the AHP can exercise control over the plan itself as if it were a single employer. If the AHP can meet this criteria, it will be considered a large group. The ACA requires small group AHPs to comply with the same Federal and State standards as ACA plans but does not require large group AHPs. For example, a small group AHP is required to comply with the ACA’s protections against setting premiums based on health status and is required to provide coverage of “essential health benefits” including emergency, maternity, and ambulatory services, among other essential benefits. President Trump’s executive order calls for loosening the requirements around the commonality of interest standards, which would allow more groups to be considered large groups. The executive order also calls for the Secretary of Labor to consider new ways to promote the formation of AHPs. Critics of the executive order express concerns that expansion AHPs will result in cheaper plans that do not provide coverage for essential health benefits.

Next, the executive order directs the Departments of Treasury, Labor, and Health and Human Services to consider new regulations to expand the availability of STLDI plans. STLDI plans were designed to provide limited benefit coverage for short periods of time, such as gap periods between employment or when transferring from one insurance plan to another. Current regulations mandate STLDI coverage to be for a period of less three months, including any renewal period. Generally, STLDI plans come with a higher-out-of-pocket cost to consumers and because STLDI plans are not defined as individual health insurance coverage, they are not subject to ACA regulations such as the mandate to provide essential health benefits. President Trump expressed that the benefit of expanding STLDI plans is that they are not subject to the “very expansive and expensive Obamacare coverage rules.”  As one means of expanding the availability of STLDI plans, the executive order asks for the administration to consider allowing STLDI plans to last for longer periods of time and to be renewed by its consumers.

Finally, President Trump’s executive order instructs his administration to expand the availability of HRAs. HRAs are employer-funded accounts that reimburse employees for healthcare expenses, including deductibles and copayments. Similar to Health Saving Accounts and Flexible Spending Accounts, HRAs are subject to regulations regarding annual caps, roll-over amounts, and limiting use to qualified medical expenses. The executive order calls for the Trump administration to seek new regulations that would “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 states that “[e]xpanding the flexibility and use of HRAs would provide many Americans, including employees who work at small businesses, with more options for financing their healthcare.” 

Critics of President Trump’s executive order believe that the attractiveness of lower premiums through AHPs and STLDI plans may drive many away from the ACA marketplace. If healthier people seek lower-cost alternatives such as AHPs and STLDI plans, those who remain within ACA plans will be left with typically be sicker enrollees that require higher premiums. Faced with more challenging risk pools, insurance companies may leave the market entirely.

President Trump’s Executive order is available in its entirety here. The official White House Press Release regarding the executive order is available here.

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