Delivery of Care

Trumpcare by executive decree: is it a full employment act for lawyers?

Christine Ferguson provides an expert analysis of what the moves by President Trump mean for the health insurance market

Photo by Richard Asinof

Christine Ferguson, the former director of HealthSourceRI, analyzes President Trump's executive actions on health care.

By Richard Asinof
Posted 10/16/17
Christine Ferguson explains the gap between the promises of greater competition that President Trump seeks through his executive actions on health care and the on-the-ground realities.
How will Congress respond to the executive actions by President Trump to diminish their legislative power? What members of the business community in Rhode Island are willing to speak out to challenge the manifestations of Trumpcare? How central will the debate about the future of health care be in the 2018 elections, both nationally and in Rhode Island? Will the R.I. General Assembly be willing to provide additional resources to preserve the expansion of Medicaid in Rhode Island? When will Congress reauthorize the now expired Children’s Health Insurance Program? When will the news media cover the fact that Neighborhood Health Plan of Rhode Island had to rebate their commercial insurance customers because they spent too much money on their administrative expenses and not enough on health care services in 2016?
The issue of transparency around health insurance products continues to be a bugaboo for customers. Customers are asked to sign a contract without being able to see exactly the actual breakdown of costs and coverage in their health plan. Imagine if the R.I. Office of the Health Insurance Commissioner required that all commercial health plans share their costs and coverage in contracts online?

PROVIDENCE – There is a lot to unload with President Donald Trump and his executive actions taken last week in his attempt to dismantle the individual marketplace under the Affordable Care Act.

First, there was an executive order issued on Thursday, Oct. 12, attempting the rewrite the rules and regulations around what is a qualified health insurance plan under the current law.

Among the things Trump sought to accomplish by executive order are: the capability for business associations to offer health plans that are outside of the current mandate of what constitutes a “qualified” plan; the capability for insurers to offer health insurance plans across state lines, and the capability to offer short-term health insurance plans for three months or six months.

All these actions come with an important caveat: “to the extent consistent with the law.” The executive order also calls upon the federal agencies of Labor, Health and Human Services and Commerce to draw up new rules and regulations to support such actions, many of which could require approval by Congress.

As a result, the new executive order promises to be “a full employment act for attorneys that know health law,” Christine Ferguson, the former director of HealthSourceRI, told ConvergenceRI in a recent interview.

Later that same evening on Oct. 12, Trump announced that he was going to scrap subsidies to health insurance companies that help to pay for out-of-pocket costs for low-income people.

Known as cost sharing reduction payments, the subsidies were expected to total some $9 billion in the coming year, according to reporting by The New York Times. Numerous state attorneys general have indicated that they will sue to prevent the elimination of the subsidies.

[Rhode Island has prepared a contingency plan to minimize the impact, according to a news release issued on Oct. 13 by HealthSourceRI and the R.I. Office of the Health Insurance Commissioner, but no precise details were provided.]

In explaining his move, Trump positioned the move by saying that he was “ending the bailout” for the health insurance companies.

Ferguson, an expert on health insurance markets, called the claim by Trump of a bailout as a “misnomer.”

The subsidies, Ferguson explained, are “an effort to make it possible for more people to actually access health coverage,” to bring them into the risk pool and provide predictability and stability to the market segment.

The thing that is so sad about this, Ferguson said, “is that Trump and a big percentage of members of Congress have never taken the time to understand what the business of health care is and how it works.”

Here is the ConvergenceRI interview with Christine Ferguson, providing an in-depth analysis of Trump’s actions and what they portend for the future health insurance market.

ConvergenceRI: What has the news media missed in terms of talking about the new executive order and the decision to eliminate subsidies?
FERGUSON:
From a policy perspective, or a political perspective?

ConvergenceRI: Both. It’s your choice where to begin.
FERGUSON:
From a political standpoint, I believe the Republicans are going to confront a concrete example of why their lack of focus and lack of attention to health care issues in a more in-depth fashion will destroy and dismantle the coalition of constituents that they have put together.

This is going to hurt them in the 2018 elections, because it is clear and transparent what the results of the changes are, if they try and rubber-stamp the executive order. It’s not going to help Republicans.

ConvergencRI: And, from a policy perspective?
FERGUSON:
When you read the language of the executive order, it tries to circumvent the existing law and provide alternative options. What it will do is to dilute the risk pool [for the individual market.]

The argument Trump is making is one we don’t actually know whether it is true or not: the argument that multi-state plans or multi-state arrangements that fall completely outside of the state regulatory environment for insurance will lower costs or increase competition.

For the record, there is nothing in the executive order that says it will pre-empt state law. The language says: “to the extent consistent with the law.”

The three major areas of change that the executive order is asking for are: association health plans, short-term limited duration health plans, and cross-state insurance plans.

With the first change, association health plans, what Trump’s executive order says is: to the extent consistent with the laws and government rules and guidelines, within 60 days, the secretary of Labor is supposed to consider proposing regulations.

The executive order is not specific whether it is talking about federal or state law. There is a lot of case law regarding ERISA [the Employee Retirement Income Security Act of 1974] versus state regulation and multi-state plans. It is not completely clear what the law of the land is, regarding case law and regulatory law and the breakdown of what states regulate and what the federal government can regulate.

A lot of what you’re hearing in the media is what could happen and what might happen.

What happened in the past with multi-state arrangements is that many were under-funded; some of them went bust without paying any claims. There are statutes and case law that covers them.

The executive order doesn’t change any of that; instead, it tells the Secretary of Labor to [propose new regulations] that will be consistent with the law, supported by “sound policy.” God only know what that means.

ConvergenceRI: Are there other requests for new regulations?
FERGUSON:
Yes. Within 60 days, the secretaries of the Treasury, Labor, and Health and Human Services are supposed to consider proposing regulations or revising guidelines – consistent with the law – for short-term, limited design health plans that would allow people to buy three-month or six-month coverage.

What that means, is basically, changing the definition of what credible coverage is, and the definition under law of what a qualified health plan is under the current mandate. Again, those new rules have to be consistent with the law.

It is a full employment act for attorneys that know health law.

ConvergenceRI: What is the legal process after the new rules are proposed?
FERGUSON:
What happens is that once the new regulations are proposed, then there is a time frame, 30-60 days, to promulgate a final regulation.

If Congress doesn’t like what has been promulgated, Congress can pass something that pre-empts those regulations.

None of these suggested changes in the executive order take effect in the short term; it is going to take at least a year for all of this to work its way through the process.

ConvergenceRI: In explaining his decision to end cost-sharing subsidies, Trump described it as a way to “end the bailout” of health insurance companies. Is that accurate?
FERGUSON:
There are hundreds of thousands of individual services and products, devices, hospitals and facilities, and what the health insurance companies are doing is pulling all of those things together, and setting a price for each one of them, evaluating what the likelihood that the people who sign up for insurance will use them.

Then they put on price on that, and a margin on top of that, and then determine what is the total amount, and what portion will be paid through premiums, co-payments and co-insurance.

For the individual/family market, the subsidies under the Affordable Care Act reflect what an individual who earns $40,000 a year can afford, taking into consideration the premium contribution and the out-of-pocket costs.

Calling it a bailout of the health insurance industry is a misnomer. The subsidies are actually an effort to make it possible for more people to access coverage. It’s easy: that portion is paid afterward, it is done administratively, and it is paid up front.

ConvergenceRI: What else do Trump and his Republican adherents not understand about the insurance marketplace?
FERGUSON:
What is troubling and sad is that they don’t understand how the market works. They believe that they are helping individuals, creating competition in the marketplace, while the opposite is going to become evident.

The changes proposed by Trump in his executive order and in the elimination of cost-sharing subsidies will have a significant impact on the entire employer-based market, and more specifically on the small business and individual market.

By eliminating cost-sharing subsidies, it gives insurance companies an out to remove themselves from the individual market, according to the current law.

The individual market is about 10 percent of the population, with about 5 percent paying the full cost without subsidies. That 5 percent is going to be hit immediately if their carriers pull out of the market or they are hit with massive premium increases.

The question is: if the changes are only going to affect 10 percent of the market, how much is actually part of the Republican base?

How many are likely to vote in the 2018 election? And, how vocal is that group going to end up being before the 2018 elections?

ConvergenceRI: What about for small business owners? I have heard that many believe that these changes will help them with more affordable health insurance?
FERGUSON:
Many in the small business community are probably jumping for joy at the executive order. But, what they don’t understand is that the ability to join a multiple cross-state plan or association plan will entirely depend upon whether the people who work for them have very few claims and health conditions.

It’s one thing to have multiple employers’ groups, it’s another thing to get into them.

What small business owners are not being told is that it’s going to depend on a couple of things: the health status of their employees and themselves, and whether the businesses have stable revenue flows. If you have cash flow problems, you are not going to be able to be accepted into these plans.

There will be a series of entry-level conditions that will prevent a lot of small businesses from joining them.

It’s not like the opportunity to join will be open to anyone. You will have to meet a bunch of conditions. And, our population in Rhode Island and our demographics are not favorable.

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