President Donald Trump wasted no time starting to unravel the Affordable Care Act, signing an executive order just hours after taking the oath of office giving federal agencies wide berth to undermine major portions of the law, including the individual mandate.
Specifically, the order directs the head of the U.S. Department of Health and Human Services and heads of other federal agencies with authorities and responsibilities under the law to “exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay any provision or requirement that of the Act that would impose a fiscal burden on any state or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, purchasers of health insurance, or makers of medical devices, products, or medication.”
It’s unlikely there will be major changes via the executive order until the heads of HHS and CMS are confirmed but the executive order sends a clear signal that change is coming. How that will play out in the insurance exchange markets, hospitals, state Medicaid programs and more is anybody’s guess, and there’s plenty of confusion to go around given the lack of details on which parts of Obamacare the order is targeting.
“While the executive order does not invalidate current regulations absent further action, various agencies can quickly use public notice and FAQ releases to limit the application of various rules,” explains Robert Projansky, head of the Health Care Reform Task Force at Proskauer Rose. “This could be done on a more limited basis or, depending on how the administration views the scope of its authority, extend all the way to limited enforcement of the individual or employer mandates.”
Robert Laszewski, president of the consulting firm Heath Policy and Strategy Associates, called the executive order a “bomb” heaved at the ACA’s “already shaky” insurance exchange market, according to The Washington Post. Others see the order as more symbolic and a political move to buy time by signaling the new administration is doing everything it can to dismantle the ACA. Just yesterday, for example, Politico reported the Trump administration decided to stop advertising ACA coverage in the final days of the current open enrollment season. This includes ads that were already paid for by the Obama administration
A blow to the individual mandate
One way it could have a short-term effect is if it made people feel less vulnerable to the individual mandate, which penalizes those who don’t purchase heath coverage. “If people become more likely to not enroll or drop coverage, this could affect the financial performance of carriers in the 2017 plan year, which could affect their willingness to participate in 2018,” Katherine Hempstead, senior analyst at the Robert Wood Johnson Foundation, said in an email “If these kinds of shifts in behavior were to occur, not all carriers and markets would be affected evenly and risk adjustment would probably not be able to even things out very well.”
Stephen Parente, director of the Medical Industry Leadership Institute at the University of Minnesota, agrees. “It probably works right now to give people relief from paying the penalty, but there needs to be a pathway going forward into 2018” to ensure a healthy individual insurance market, he tells Healthcare Dive.
For one thing, easing up on the individual mandate is likely to drive up premiums because those that opt out are likely to be healthy, leaving insurers to cover an increasingly sicker and higher-cost population. That could be anywhere from 5% to as high as 20%, Parente says.
It’s also likely to reduce competition as plans that aren’t competitive or don’t want to accept the risks associated with adverse selection move out of ACA markets. With fewer insured — the Congressional Budget Office has estimated that ACA repeal could cost 18 million to lose coverage — hospitals could see a bump in charity care cases.
The executive order also calls for more flexibility for states to implement healthcare programs and encourages “the development of a free and open market in interstate commerce for the offering of healthcare services and health insurance, with the goal of achieving and preserving maximum options for patients and consumers.”
This worries Larry Levitt, senior vice president at the Kaiser Family Foundation. All of the current ACA replacement proposals largely do away with with federal regulation of minimum benefits, including Sen. Rand Paul's recently proposed plan. “There’s a high likelihood that the coverage in the individual market would look more like it did before the ACA with limited coverage, for example, for maternity care, for mental health, and also strict limits on the drug coverage that’s available,” he told a Wednesday media briefing on the executive order.
The ACA also mandated coverage of a host of preventive services, such as breast cancer screenings and birth control, and it prevented gender discrimination in pricing policies for plans—provisions that have had a huge impact on out-of-pocket costs. Those, too, could be lost as the ACA is scaled back and repealed.
At the same time, many of the value-based reforms set in motion by the ACA are likely to persist — at least for now — as they’re ensconced in regulations and federal rulemaking.
Changes to Medicaid
Experts are also interpreting the phrase “provide greater flexibility to States” as a nod to giving states more Medicaid waivers and possibly encouraging the use of Section 1332 waivers in Obamacare, which allow the states to come up with different ways of achieving the law’s goals.
“It could even be things such as allowing the plans to perhaps continue offering, depending on the state, some of the nonqualified health plans that might have higher deductibles and not quite the same level of mandated benefits as what required from the ACA,” Parente says.
Diane Rowland, executive vice president of KFF, also sees the potential for a lot of disruption if states are given more responsibility and flexibility regarding healthcare programs. “Much of what was implemented during the ACA was to standardize the eligibility procedures and the enrollment, and I assume that those might be also in question,” she told Wednesday’s briefing. “Changing those again would be a major change to go back to some of the state-based systems.”
Hospitals and nursing homes are likely to suffer, too, if states have fewer funds to provide coverage under Medicaid. “They already have pretty low reimbursement rates in many states for physicians, so there’s a question of how low can you go?” Rowland said.
With hospitals generating jobs and income for states, any hit they take financially is bound depress state revenues, making it harder to fund healthcare programs overall, she said. Moreover, as more people got insured, both in the general population and through Medicaid expansion, federal funding for uncompensated care was cut back, leaving hospitals more vulnerable to any uptick in uninsured patients.
Given the general nature of the executive order, it’s hard to truly gauge its effect. “The real impact will be seen once leadership and staff at the Treasury, Labor and Health and Human Services Departments are in place and they begin to take action,” says Projansky.
Meanwhile, lacking a filibuster-proof Congress, Republican lawmakers will likely continue to chip away at the ACA via the budget reconciliation process. But this route is limited to revenue-related provisions. Price, Paul, House speaker Paul Ryan (R-WI) and Reps. Bill Cassidy (R-IL) and Susan Collins (R-ME) have all drafted different replacement measures, but none has emerged as the way forward after Obamacare.