Trump moves to undermine Obamacare

President Donald J. Trump began his own effort to undo major parts of the Affordable Care Act after Republican leaders in Congress failed to repeal and replace his predecessor's signature legislative accomplishment. Mr. Trump's directive, signed in a White House ceremony on Thursday, tells federal agencies to consider a number of steps that could erode many of the core tenets of Obamacare. The president asked regulators to craft rules that would allow small businesses to band together to buy insurance across state lines, let insurers sell short-term plans curtailed under Obamacare, and permit workers to use funds from tax-advantaged accounts to pay for their own coverage. "We've been hearing about the disaster of Obamacare for so long," Mr. Trump said in signing the order. "For a long time, I've been hearing repeal, replace, repeal, replace." Mr. Trump opted for an executive order after he was unable to rally Republicans to overturn Obamacare — and as the White House looks to consolidate support for a far-reaching overhaul of the U.S. tax code. But allowing for cheaper plans with fewer benefits favored by healthier customers could jeopardize the rest of the system, opponents claim.

Parallel Structure

While the administration characterized the order as a way to drive down rising premiums and expand coverage to more Americans, critics said it would undermine existing markets by encouraging healthier people to buy skimpier plans. That would likely lead premiums for Obamacare plans, which offer more encompassing coverage regardless of a person's health history, to surge. "It would essentially create a parallel regulatory structure within the individual and small group markets that is freed from the various consumer protections established," said Spencer Perlman, a policy analyst with Veda Partners, an advisory firm. "The end result could be a death spiral for ACA-compliant plans." The changes won't be felt immediately. Each agency will have to craft new rules, which will be open to public comment and could face challenges from the insurance industry and state regulators. But Trump's actions signaled that the longer-term unraveling of Obamacare is a priority despite the setbacks on Capitol Hill this year. "The policies outlined in the executive order are the beginning of the actions the administration will take to provide relief to people harmed by Obamacare," said Andrew Bremberg, director of the administration's domestic policy council, on a call with reporters earlier Thursday. "You should expect additional actions coming from the administration in months to come."

Partisan Divide

Republicans in Congress welcomed the move. Kentucky Sen. Rand Paul, who had stood in the way of a health-overhaul measure that would have replaced Obamacare with block grants, spoke at the ceremony and hailed the order as the strongest market-based reform of health care in years. House Speaker Paul Ryan, who won approval for a repeal-and-replace bill that later died in the Senate, said Mr. Trump's action was "in perfect keeping with what we've been planning all along," adding that instability in the insurance market was a function of the Senate failing to act. But Democrats on Capitol Hill said the maneuver was a calculated effort to allow Obamacare to crumble after Republicans faltered in their repeal efforts. "After failing to convince the American people and the majority of Senators, Trump is now forcing Trumpcare via executive order. It's sabotage," said Sen. Cory Booker of New Jersey. Amid the uncertainty over repeal and fear that Trump could drop subsidies that help lower-income people buy health coverage, premiums under Obamacare have been rising. About 83% of the 12.2 million people in the Obamacare marketplace receive subsidies, according to the Centers for Medicare and Medicaid Services. Insurers have told many states they will need to charge higher premiums next year to offset uncertainty around the subsidy payments. Costs have also climbed for those who don't qualify for assistance. The average monthly premium not including subsidies for a family of four with $60,000 in annual income was $1,090, or $13,080 a year for a midlevel "silver" plan, according to a 2016 report from the U.S. Department of Health and Human Services.

Group Formation

Group health-insurance plans were more common before Obamacare. Christopher Condeluci, a former Senate Republican aide who now runs his own law and consulting firm, said the plans "came crashing down" after a 2011 rule from the Centers for Medicare and Medicaid Services said small employers could no longer come together to buy coverage. Since then, individuals and small groups of people have had the option either to sign up for insurance in the Obamacare markets or buy outside of them. Subsidies are available up to a certain income level for people who buy on the markets. According to the Internal Revenue Service, 12.7 million taxpayers claimed a health-care coverage exemption on their tax forms, some because they couldn't find an affordable plan. Letting individuals and not just small businesses join associations would require loosening regulations set by the Employee Retirement Income Security Act of 1974, or ERISA, about which groups qualify for a health plan. Trump's order would seek to redefine who qualifies as an employer under the law. "There are a lot of details that will be worked out in the regulatory process," said Matt Fiedler, a fellow at the Brookings Institute. "It also remains unclear whether some of these actions are legal. All this means that there is still a lot of uncertainty."

The Short Term

Loosening the rules on short-term plans would create another option outside of the ACA by allowing people to buy low-cost, temporary plans instead of more comprehensive, longer-term coverage. The order would reinstate an earlier rule allowing insurers to sell short-term plans that provide coverage for up to 12 months, expanding beyond a three-month cap set by the Obama administration last year. Such plans typically provide limited coverage that doesn't pay for maternity care, addiction treatment or other areas held to be critical benefits under Obamacare. The plans also often have annual lifetime limits and can exclude sick individuals from buying them. Under the ACA, these plans don't meet the individual mandate of having health insurance, so buyers are subject to a tax penalty. Gary Claxton, director of the health-care marketplace project at the Kaiser Family Foundation, said if the penalty were lifted, healthy people would leave the Obamacare marketplace for cheap, low-coverage insurance, and if they become ill, they'll go back to the Obamacare exchanges for better coverage. "It draws people in if they're healthy and spits them back out if they're sick, which undermines the general risk pool," Mr. Claxton said.