Last week, the President took a number of actions that will impact the individual and small group markets.
Cost-Sharing Reduction Payments – The President instructed the administration to stop making cost-sharing reduction payments (CSR payments) to insurance carriers. While many carriers have either raised rates or exited markets in anticipation of this action, the fact that the President confirmed that the payments will no longer be made, changes the ground rules under which carriers have been operating since the ACA was implemented.
As of today, the attorneys general for 18 states have banded together to file a suit to restore the CSR payments and are seeking an immediate injunction against the administration’s discontinuation of them. While the injunction, if granted, would restore the payments immediately, it is unclear whether the court, which previously sided with House Republicans in stating that the payments were not legal, will agree with the states that the payments should continue long-term.
Executive Order – On October 12, the President issued an executive order covering three items:
Association Health Plans (AHP’s) and selling insurance across state lines.
Health reimbursement arrangements (HRA’s).
Short-term, limited-duration insurance (STLDI).
The President instructed various departments to consider and develop rules that would make AHP’s available to a wider range of businesses with a “commonality of interest” (more about AHP’s). The departments have 60 days to develop such rules. If the departments have the leeway to relax rules related to AHP formation and membership, many more businesses could elect to secure coverage through associations, if permitted by their states, leaving traditional small group insurance pools in those states with fewer members. We’ll know more once the departments (which include the DOL, Treasury, and others) draft proposed rules.
The President also instructed various departments to consider ways to make HRA’s more widely available, including standalone arrangements, which are currently not permitted by the ACA. In December 2016, Congress authorized the use of HRA’s as a way for employers to reimburse employees for the cost of individual coverage, but guidance on this provision is minimal and not many businesses have adopted HRA’s for this purpose. This may be one use of HRA’s that the administration will look to encourage. The departments have 120 days to propose or suggest amendments to the rules regarding HRA’s.
Finally, the President’s executive order mandates a new look at short-term, limited-duration insurance (STLDI). Currently, STLDI is limited to a three-month term and cannot be renewed. The departments are to consider relaxing both the time and renewal limitations.
It is difficult to know exactly how the lack of cost-sharing reduction payments will impact markets, but it is widely agreed that the individual market will become much more volatile as a result. Regarding the executive order, it will take time for the DOL, Treasury and other departments to propose rules regarding AHP’s, HRA’s and STLDI, then go through the public comment process before changes are made. So unlike the CSR payment issue, which has immediate impact, the executive order topics will play out over an extended period of time.