Update on the Volatile State of the Affordable Care Act

By Lehr Middlebrooks Vreeland & Thompson, P.C.

October 27, 2017

A couple weeks ago, President Trump took a major step in dismantling the Affordable Care Act, or "Obamacare,"when he announced his Administration would stop providing federal subsidies to health insurers that help provide insurance coverage to millions of low-income Americans. As a part of the ACA, the federal government has been providing payments to health insurers to help provide affordable coverage for approximately 6 million consumers in the ACA marketplace. While President Trump has made various threats regarding these payments and caused much fear and anxiety for insurers and consumers over the past few months, last week he formally confirmed the Administration would cease the payments immediately. President Trump based his decision on Attorney General Jeff Sessions's opinion that the payments were illegal without congressional appropriation.

Many critics—including insurance companies, policy specialists, and various state officials—have said this action will essentially sabotage the ACA marketplaces and the ACA itself. It is anticipated that such action would result in insurers leaving the marketplace because they can no longer afford to offer the discounts for consumers without the subsidies and/or a direct increase in the costs of premiums and deductibles for consumers. Ultimately, either of those outcomes will likely place coverage out of reach for many consumers, many of whom live in states that President Trump won last November. For example, according to the U.S. Centers for Medicare and Medicaid Services, approximately 4 million people benefit from the subsidies in the 30 states that the President carried in November. In Mississippi, it is estimated that premiums will increase by 47% next year as a result of ending the cost-sharing payments.

Many critics also warn of extensive litigation over the Administration's decision. Democratic-led states are already seeking injunctions against the action in order to keep payments flowing. These states argue that President Trump is violating the Administrative Procedures Act by refusing to faithfully execute federal law. Additionally, insurers will likely seek to recover the payments they believed they are owed by the federal government. While the outcome could be tied up in the courts for some time, legal experts do not expect the courts to force the Administration to continue payments during such litigation. While the decision to end the cost-sharing payments will not likely directly impact the employer-based insurance market, it is a sign that the Trump administration will continue to take action to dismantle the ACA. If the Administration and Congress can eventually repeal the ACA, the employer-based insurance market would be impacted in many ways, likely including extensive deregulation of the industry.

In addition to his announcement regarding the cost-sharing payments, President Trump also issued an Executive Order designed to rescind some ACA regulations and give several executive departments the ability to propose new regulations. More so than the withdrawal of cost-sharing payments, the President’s Executive Order could impact the employer-based insurance market. President Trump's order asks certain federal agencies to relax limits on temporary insurance plans and association health plans. With regard to temporary insurance plans, President Trump is hoping to make these plans, which are exempt from most insurance rules, available to consumers for a longer period of time and with less notice requirements, than allowed under the Obama Administration’s regulations. This will be beneficial to younger, healthier individuals who do not want to pay for comprehensive plans. Additionally, President Trump wants to relax regulations on association health plans, which would make it easier for smaller employers to join together and buy insurance through association health plans, which might be able to offer plans across state lines and different rates for different employers. Furthermore, President Trump's order is designed to widen employers' ability to use pretax dollars for health reimbursement arrangements that aid employees in paying for insurance premiums and medical care. President Trump reversed the Obama Administration's requirement that these arrangements can only be used for health policies that meet ACA rules.

In response to critics, the Administration has punted the funding issue to Congress and argued that Congress should appropriate the funds if it wants payments to continue. Since the last failure to repeal the ACA and President Trump's Executive Order, there has been a renewed bipartisan effort in the Senate to restore the cost-sharing payments over the next two years. The bipartisan deal is designed to avoid chaos and keep premium increases in the marketplace at a minimum. The bill is designed to allow states the ability to make changes in their own marketplaces while still protected essential health benefits and basic coverage guarantees. While it sounds promising, Congress appears to be incapable of passing any major legislation, particularly any legislation of a bipartisan nature. As such, you might not want to hold your breath waiting for pass age of a bipartisan deal.

Ultimately, the ups and downs of the ACA are important to follow regardless of whether or not you are a consumer in the ACA individual marketplace. In light of Congress's continued inability to achieve President Trump's campaign promise to repeal and replace Obamacare, you can expect that President Trump will continue to take all available executive actions to achieve that goal. Such efforts will likely result in changes to how all insurances plans operate and what types of coverage they may offer.