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Selling Insurance People Want To Buy

President Trump signs an executive order in the Roosevelt Room at the White House while observers applaud
President Trump signs an executive order on health care, Oct. 12, 2017. Photo by Andrea Hanks, courtesy the White House.

If you are a healthy young adult, President Trump’s executive actions on health insurance last week promise to go a fairly long way toward restoring some potentially attractive options that his predecessor tried very hard to take away from you.

Likewise, if you own a small business, there is quite a bit to like in the president’s unilateral action – assuming your business does not involve selling insurance coverage on the Affordable Care Act’s much-maligned (and deservedly so) exchanges.

Trump’s orders fall far short of the “repeal and replace” promise on which he, along with pretty much every Republican in Congress, campaigned. But there are limits to what a president can do. Again unlike his predecessor, however, Trump seems to recognize those limits. (It is fair to observe that the situation was reversed when it comes to any limits on what a president might say – or tweet. The adage that actions speak louder than words has never been more applicable.)

The first executive order, which Trump signed on Thursday, called for federal agencies to consider new regulations to expand and encourage short-term health plans that were restricted under the Obama administration, as well as loosening rules around how workers can use employer-funded health accounts and encouraging “association health plans” that could operate across state lines. Shortly after, Politico reported the White House’s plans to stop an estimated $7 billion in subsidy payments to insurers; press secretary Sarah Huckabee Sanders confirmed the decision in a statement that evening.

While the president can only do so much, these decisions will have real consequences. First, the short-term health policies that some healthy customers used in place of more expensive options will no longer face the 90-day limit and renewal restrictions imposed under the previous administration. Healthy adults, especially young adults, who do not get insurance through their jobs will be able to buy such bare-bones, short-term coverage to cover catastrophic situations – the main financial purpose of insurance – without having to subsidize the cost of older and sicker buyers through mandatory participation in health care plans offered on the exchanges.

Trump’s order also sets the stage for employees of any age or health status to use employer-funded reimbursement accounts to pay for insurance premiums if they want to do so. “Health reimbursement arrangements” faced restrictions under the Obama administration, intended to strong-arm small and midsize businesses into providing insurance coverage directly, rather than giving their employees a lump sum to use to purchase whatever policy they wish to purchase on an Affordable Care Act exchange.

Small and midsize businesses may also benefit from the association health plans that Trump has directed federal agencies to consider. Such groups would be treated more or less like large employers, thus permitting interstate operation, among other benefits. Many businesses already offer life and disability insurance under plans sponsored by organizations such as the American Institute of CPAs or various state bar associations. Such organizations could realize an advantage through combined market power and expanded geographical footprints.

As for the cost-sharing reduction payments, the Affordable Care Act authorized them but did not fund them. When the Affordable Care Act exchanges opened in 2014, then-President Obama chose to claim the “power of the purse” for himself by appropriating money to make the payments. His administration later challenged the standing of the House of Representatives to contest this action in court. U.S. District Judge Rosemary Collyer, a George W. Bush appointee, found that the House had standing to sue and, moreover, that the prior administration did not have a legal leg upon which to stand when it disbursed the unappropriated funds. She issued a summary judgment striking down the payments last year. Collyer then stayed the effect of her ruling pending an appeal.

The Trump administration is now likely to simply drop the appeal, which should moot the case. Yet in a D.C. Circuit packed with Obama appointees, thanks to Harry Reid’s nuclear option, pretty much anything could happen. The court might try to give itself standing to prolong the case and ultimately send the issue to the Supreme Court. We will have to wait and see.

In the meantime, many of Trump’s critics claim that eliminating the cost-sharing reduction payments will cut off subsidies to Affordable Care Act purchasers to cover deductibles and co-payments. This is a myth. Insurers are still required to provide those subsidies to purchasers below 250 percent of the federal poverty line. An estimated 7 million people – more than 58 percent of people buying coverage through the exchanges – received cost-sharing benefits in 2017.

Cutting off these payments might not even save the federal government any money. The effect will be to boost the premiums the insurers must charge to make up the lost $7 billion, which will then boost the tax credits that around 80 percent of Affordable Care Act purchasers receive to subsidize their premiums. What cutting the payments will do is drive away the exchanges’ unsubsidized purchasers, many of whom are already staying away unless they are old or sick. That effect is unfortunate. But without Congress’ help, a president can only do so much.

The majority of the strident defenders of the Affordable Care Act are people who don’t get their insurance through its exchanges. The rest are people who either get their coverage for free under the law’s expansion of Medicaid (although many of those people struggle to find doctors to actually see them) or are baby boomers who benefit from the burdens borne by millennials under the law’s forced subsidies. Right now, millions of Americans are opting to pay penalties that give them no coverage at all rather than take on the unaffordable burdens of health insurance offered through the Affordable Care Act. Trump’s actions promise them a little breathing room, and might even spur some congressional action on the topic in the bargain.

We can only hope so. There is just so much a president can do on his own.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us” and Chapter 4, “The Family Business."

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