Executive Order Directs Agencies to Consider Expanding Health Coverage Options, Including HRAs

Citing concerns about choice and competition under the Affordable Care Act (ACA), President Trump has issued an executive order directing the Treasury Department, DOL, and HHS to consider proposing regulatory changes that would increase health care options and promote market competition. The order focuses on expanding the availability of three types of health coverage arrangements:

• Association Health Plans. The order directs the DOL to consider, within 60 days, proposing regulations or revising existing guidance that would allow more employers to form association health plans (AHPs). Specifically, the DOL is to consider expanding the conditions that satisfy the commonality-of-interest requirements under its advisory opinions interpreting the definition of “employer” for purposes of ERISA. (Under current guidance, an AHP requires a “bona fide” association of employers that have a genuine organizational relationship and an ability to control the association. According to the order, expanding access to AHPs would help offset competitive disadvantages faced by small businesses by allowing them to band together to self-insure or purchase large-group health insurance, thereby avoiding costs associated with certain ACA requirements that apply only to small group and individual plans.
• Short-Term, Limited-Duration Insurance. The order directs the agencies to consider regulations or guidance, also within 60 days, that would allow short-term, limited-duration insurance to cover longer periods and to be renewed by the consumer. (This insurance, which typically has higher out-of-pocket costs and covers fewer services than traditional insurance, is generally not subject to certain ACA mandates and currently must have a coverage period of less than three months, including any possible extensions.
• HRAs. The agencies are also directed to consider, within 120 days, proposing regulations or issuing guidance that would increase the usability of HRAs, expand employers’ ability to offer HRAs to their employees, and allow HRAs to be used in conjunction with nongroup (i.e., individual) coverage. (Under current guidance, HRAs—other than qualified small employer HRAs and HRAs that only benefit retirees or reimburse only excepted benefits—generally must be integrated with a qualifying non-HRA group health plan to satisfy ACA mandates.

The executive order does not change any laws or regulations; rather, it directs the agencies to consider proposing changes to the rules that apply to the three types of arrangements. While the stated purpose of the order is to provide high-quality health care at affordable prices, concerns have been raised that the proposed actions would encourage healthy individuals to seek coverage outside of the Exchanges, adversely affecting the Exchange risk pool, causing higher premiums and fewer insurers, and leaving these individuals without the ACA’s consumer protections. The order’s ultimate impact will not be known until after the agencies conclude their rulemaking process and final rules take effect.