Can the Trump administration fix health insurance?

Like millions of consumers, many employers are ill at ease about the future of healthcare under the Trump administration. Anxiety over higher premiums, fewer choices and a roll back of Medicaid expansion after 2020 have become sovereign pain points for all concerned. Other developments, including the introduction of the Direct Enrollment Proxy Pathway and the Centers for Medicare and Medicaid Services’ decision to discontinue the Federally-Facilitated Small Business Health Options Program (SHOP exchanges), have added to the consternation.

It may not be as bad as it seems. Here’s what employers need to know about Republicans’ plans for reforming the U.S. healthcare system:

Since promising to repeal and replace the Affordable Care Act, the Trump administration has taken a number of measures to allay the public’s concerns. These include an executive action purportedly aimed at reducing the economic burdens placed on consumers by the ACA and the release of a Marketplace Stabilization Rule.

Meanwhile, the GOP has introduced two bills in Congress: The American Health Care Act [H.R. 1628] in the House and the more recent Better Care Reconciliation Act of 2017 [H.R. 1628] in the Senate. These bills would replace the ACA and establish a system that Republican leaders claim would lower the cost of healthcare, expand options for consumers, reduce federal spending and grant small businesses and professional associations the ability to establish health plans that operate outside of state insurance regulations.

The Better Care Reconciliation Act of 2017, as it stand now, in particular sheds light on the GOP's vision for the future of healthcare:

1) An increased reliance on health savings accounts
Like the House’s American Health Care Act, the Senate’s legislation would nearly double the maximum amount per year that individuals and families could contribute to a health savings account on a tax-deductible basis. In 2017, this would be $6,550 for an individual; beginning in 2018, the basic limit would rise to $6,650 for individuals and $13,300 for families. Other features would expand the list of qualified medical expenses and do several things to make it easier for participants to get more money into both HSAs and flexible spending accounts.

These changes would be significant, because HSA adoption has already gained significant traction. Research by America’s Health Insurance Plans indicates that nearly 20 million Americans participated in an HSA in 2016 — a nearly 525% increase from 2006. This spurt, according to industry experts, is linked to the appeal of low-cost, high-deductible health plans to younger consumers.

2) Elimination of the individual mandate
In lieu of the ACA’s individual mandate, which they strongly oppose, the GOP proposals include penalties for lapsed coverage to be levied by insurers, combined with tax incentives for purchasing health insurance. To this end, the Trump administration issued an executive order requiring federal agencies to refrain from enforcing any ACA provisions that impose costs or penalties on individuals.

The downside of eliminating the mandate is a likely reduction of young healthy members in the risk pool, but incentives for HSA participation combined with more age-progressive rate structures could potentially compensate for this.

3) Offering plans across state lines
To increase plan competition and provide more affordable coverage, the Trump administration favors allowing issuers to sell insurance across state lines.

Ironically, permitting issuers to sell insurance cross-state is currently a provision within Section 1333 of the ACA, and states including Maine, Georgia and Wyoming have already passed laws allowing consumers to buy health insurance in a different state. Similar legislation is pending in other states.

While selling across state lines is not included in the ACHA or the BCRA, House Speaker Ryan and other GOP congressional leaders say they plan to introduce this reform as part of their stage two healthcare regulations.

Cross-state selling has the potential to address the steepest barrier to healthcare insurance for most consumers, which is cost. According to the National Health Interview Survey, 29 million (9%) U.S. adults cannot afford health insurance, while more than 60% of millennials say that $100 per month is the absolute maximum they can spend on health insurance. This last point is extremely important, as millennial participation is viewed as critical to balancing the industry’s risk pools.

In a related effort to help lower the cost of health insurance, the Trump administration proposes to repeal the ACA measure that requires issuers to cover a minimal standard of care as defined under the act’s 10 essential health benefits.

4) Permitting employers to create association health plans
The Senate bill would grant small businesses and associations the ability to establish small business health plans that operate outside of state insurance regulations. These association health plans, variously known as group trusts, multiple employer welfare associations or small business health plans, would provide more than 28.5 million small employers with the option of offering common health benefits to employees across state lines. According to supporters of the Senate bill, this would allow small businesses to buy more affordable coverage.

Before the ACA passed, national associations could pick and choose which states' insurance rules to adhere to. In other words, an association could adopt the rules of New York's insurance market, for instance, and apply those in other states. The ACA eliminated these differences by mandating that all AHPs cover the 10 essential health benefits. The Senate bill would reintroduce the difference in coverage levels as defined by the 50 states, allowing AHPs to choose the coverage level that they deem most affordable.

A growing emphasis on consumerism
The GOP plans to transfer more responsibility to consumers, states and issuers. This is bound to happen no matter what proposal is adopted. The ACA, through all the good and bad, established a permanent paradigm shift regarding people’s relationship with their healthcare. The time-worn process of premium billing is no longer accepted as the only valid payment method, and the advancement of micro-services will lead to even greater disruption in this complicated healthcare space.

Once the course of technology or business process innovation begins, there is no stopping it. In today’s world, can you imagine trying to force everyone to book their vacations through travel agents instead of utilizing a service like Travelocity or Expedia? Healthcare will likewise adapt to the demands of the consumer, no matter who is in charge.

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