Trump’s big new proposal to undercut the Affordable Care Act, explained

The Trump administration just dropped new regulations to allow more small businesses and self-employed Americans to buy skimpier health insurance that doesn’t comply with the Affordable Care Act’s regulations — part of the White House’s multi-pronged crusade to undermine the health care law.

These new rules would make technical changes to “association health plans” — a fixation for Republican lawmakers seeking alternatives to the ACA — that would allow more companies and self-employed individuals to join them. They would also exempt the associations from some of the law’s core insurance rules, which Republicans blame for increasing insurance premiums.

The bottom line is that Trump, as ordained in an executive order last fall that led to these new regulations, is looking to carve out more exemptions for people to escape the ACA’s marketplaces and regulations. Health experts fear that this will damage the law’s markets, because the businesses and people most likely to seek out association health plans under these rules, and avoid the ACA mandates, are younger and healthier, leaving behind an older, sicker, and costlier ACA market.

The new proposed rules from the Trump administration, which will still need to be finalized, make several technical changes related to ERISA — the federal law that governs employer benefits — that are designed to allow more people and businesses to join associations and to exempt association health plans from the ACA’s regulations.

The rule would allow businesses in the same industry but different states to band together as an association and buy coverage, experts said. It would also allow companies in the same geographic area, but not necessarily the same line of work, to form associations.

IHPI member Nicholas Bagley, a law professor at U-M who follows health policy, flagged one potential hazard of this change: Associations could “redline” their geographic definitions to exclude certain high-cost areas or employees. Maybe they define their region to cover only a lower-cost urban area and excluding a higher-cost rural area, for example.

“You could imagine lots of creative efforts to define geographic areas to exclude high-cost employees and high-cost areas,” he told me Thursday. “The market dynamics will be complicated, but there will be temptation to do that redlining.”

The other major change would allow more sole proprietors, people who own their own business, to join associations and purchase this large-group coverage that does not have to meet some of the ACA’s mandates. The rule does include some conditions, such as requiring those individuals to work 30 hours per week for a month, to be considered a sole proprietor.

Bagley gave the example of Uber drivers who work more than 120 hours a month defining themselves as sole proprietors and deciding to band together as an association and buy coverage, instead of purchasing insurance through the ACA’s marketplaces.

Under this example, Uber drivers, or other workers in this hypothetical, are more likely to be young and healthy, meaning their exit from the health care law’s markets would leave behind an older and sicker pool, which drives up premiums for the ACA plans.

“That could end up creating a real drain, imbalancing the risk pools in the [ACA] exchanges,” he said.

Bagley also noted that the Trump administration’s regulation prohibits associations from asking too many questions of individuals who want to join their plan, which could further exacerbate that drain on the markets.

“They cannot look behind it and cannot ask for more certification,” he said. “As loopholes go, it doesn’t get any bigger than this.”

The regulation notably does not appear to preempt state regulations, Jost said, which means individual states could take steps to try to mitigate any adverse effects on their health insurance markets.

Going forward, the issue of self-employed individuals might be the most ripe area for legal challenges, Jost and Bagley said. It goes to the heart of what ERISA is supposed to be about.