How the Trump administration handled the ACA marketplace, Part 2

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The Trump administration stretched the clock for short-term, limited duration health plans

This post is Part 2 of an assessment of Trump administration policy with respect to the ACA, most specifically the ACA marketplace. Part 1 overviewed the administration’s early encouragement of state reinsurance programs, Trump’s cutoff of direct reimbursement of insurers for Cost Sharing Reduction subsidies, and the defunding of the Navigator enrollment assister program, paired with considerable support for health insurance brokers.

Below, we’ll look at the effective repeal of the individual mandate penalty (the one legislative initiative considered), and regulations designed to boost an alternative market of ACA-noncompliant plans.

As each part keeps ballooning as I write it, we’ll leave other administrative changes, loosening requirements on insurers and tightening them on prospective enrollees, to a Part 3.

Zeroing out the individual mandate penalty. After the Republican Senate in the summer of 2017 declined to take up the ACA “repeal and replace” bill passed by the House and then failed to pass its own repeal/replace alternative, John McCain famously scotched a final attempt to pass a “skinny” repeal bill that would have simply repealed the individual mandate and brought the Senate into conference with the House, perhaps to make one more run at a more comprehensive repeal/replace alternative. Following those failures, Republicans reduced the mandate penalty to zero in their massive tax cut bill passed in December 2017.

As an expression of intent to dismantle the ACA, the zero-penalty mandate’s chief function was to enable Republicans’ final attempt to void the ACA through the courts. In February 2018, a group of 20 states, led by Texas, sued to have the mandate declared unconstitutional, and the entire ACA statute voided. The suit sought ACA nullification on the ridiculous grounds that a) the 2012 Supreme Court decision upholding the constitutionality of the mandate did so only on the basis that the mandate is a tax, and within Congress’s taxing power; b) a zeroed-out mandate is no longer a tax; and c) since the Democratic Congress passed a resolution in 2010 declaring that the mandate was an “essential part” of the ACA’s overall “regulation of economic activity,” the whole law (including myriad parts unconnected with the ACA marketplace) had to be vacated. In June 2021 a 7-2 Supreme Court majority dismissed the suit, finding that the plaintiffs did not have standing because no one was harmed by a $0 penalty. The litigation did enable the Trump administration, 20 Republican attorneys general, and 126 House Republicans who signed an amicus brief in support of the plaintiffs to display root-and-branch opposition to the ACA for another three years after the legislative repeal drive failed.

Negation of the mandate was expected to drive healthier enrollees out of the market, raising premiums and thus further reducing enrollment. In 2019, CBO forecast (p. 11) that the $0 mandate penalty would increase the uninsured population by 7 million, or a bit more than 2%, and reduce marketplace enrollment by 4 million.

Limit short-term health plans to a...short term? Buyers and sellers speak out

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My last post considered a rule proposed by the Departments of Health and Human Services, Treasury and Labor to restore a three-month term limit on so-called Short Term, Limited Duration (STLD) health plans. Those plans are currently available for year-long terms in some states, renewable for up to three years.

My main point was that if the removal of the ACA’s original income cap on subsidies by the American Rescue Plan Act (ARPA), extended through 2025 by the Inflation Reduction Act, is not further extended, STLD plans will once again be the only viable option as of 2026 for some modestly affluent non-elderly people who lack access to employer-sponsored or other insurance. For that reason, I suggested that the proposed rule automatically sunset if the income cap on subsidies returns.

To review briefly: STLD plans are not regulated as insurance and not compliant with ACA rules for individual health plans. They are medically underwritten, do not have to cover the ACA’s Essential Health Benefits (drug and mental health benefits are often excluded or very limited), are not subject to the balance billing protection provided by the No Surprises Act, and generally cap benefits at $1 million or $2 million. Some but not all STLD plans have provider networks (and so some balance billing protection) and annual out-of-pocket caps for covered benefits.

For further perspective I turned to the comments submitted so far in response to the proposed rule. There are just 43, from a mix of consumers and brokers (as opposed to more than 25,000 for the FDA’s proposed ban on most noncompete agreements). All, perhaps not surprisingly, ask that the allowable STLD term not be shortened as proposed.

Can blue states protect their health insurance markets from Trump's executive order?

Can a state that wants to preserve ACA consumer protections protect itself from the executive order Trump signed today, which opens paths to segmenting the risk pools in the individual and small group markets? Consider the case of New Jersey, which had guaranteed issue (and, with no individual mandate, sky-high premiums) pre-ACA.

The Trump EO instructs Treasury, DOL and HHS to expand availability of short-term insurance, allowing it "to cover longer periods and be renewed by the consumer."  That's understood to mean allowing coverage for up to a year -- and so, via renewal, indefinitely, though subject to medical underwriting at renewal as well as at first purchase.  Short-term plans are not subject to ACA coverage rules.

At present, plan duration is limited to three months. Since  that rule only went into effect this April, extending the term to up to a year is not a radical shift from the ACA status quo.  But combined with weak enforcement of the individual mandate, and more exemptions from the mandate stemming from rising premiums, temporary plans available continuously are likely to weaken the ACA risk pool.

Temporary plans are subject to state regulation, however, and health law scholar Nicholas Bagley expects that to continue:

13/ The states should still retain authority to regulate short-term plans -- and to require them to adhere to ACA rules.

— Nicholas Bagley (@nicholas_bagley) October 12, 2017