Extreme Healthcare Chaos

Turmoil by executive order again… On Thursday, President Trump threw two more giant logs on the raging healthcare marketplace fire by ordering the discontinuance of federal funding for cost-sharing subsides for low income Americans and by directing the Secretary of Labor to provide guidance on liberalizing association healthcare plan rules.

Cost-sharing subsidies made healthcare affordable for those earning below 250% of the federal poverty level, but late last year a federal court ruled that congress failed to appropriate funding for this benefit. Funding had been continued pending a Democratic appeal, but now this will stop.

Once the rules are written under the association directive, workers across the nation in the same line of business, regardless of company size, will be permitted to band together to purchase insurance. As with any such directive the devil will be in the details. But this one is a whopper. Conceivably an association, which exists or can be formed, can be situated in any state to take advantage of state laws and coverage mandates which are favorable to the association. This executive order also expands short-term coverage availability and health reimbursement arrangements.

The market will quickly divide: by those that need coverage for certain conditions, those that want bare bones, stripped-down plans and those that will no longer obtain coverage because it is simply unaffordable. And even the more liberal states will have their risk pools diluted by the nationwide associations that will siphon off good risk. My fear is that this will undermine the fragile small group market entirely and insurance carriers who must abide by guaranteed issue regulations are going to run for the hills.

The federal government will need to write more laws to enact this order and the states are going to try to build “walls” to protect their citizens from these actions. The insurance carriers surely will not sit by idly and lose money on adverse risk selection. And no doubt both states and the Democrats are going to keep the courts very busy. Confusion will reign and the “bad risks” will be left holding the bag – and they are going to scream.

Under the association order, the Secretary of Health and Human Services has 180 days to report to the president on laws which adversely affect the market. That’s easy. They should start with these two executive orders.

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