Trump’s EO on the ACA

The Trump administration issued its first executive order. The subject is the ACA. The order seeks to destabilize the non-subsidized and off-Exchange portions of the risk pool by minimizing enforcement of the individual mandate.  Dan Diamond at Politico had the first link to the actual order that I saw:

Section 2 is the critical component for the individual market. Section 3 has significant impact for both Exchanges and Medicaid.

Analysis below the fold:

Section 2 instructs ever element of the government to use all legal discretion in the direction of minimizing costs to any state or individual. If there is a way to rationally argue that a decision could lead to a cost or not to a cost, the federal government will come down on the side of not imposing a cost. This is critical as the Secretary of Health and Human Services (HHS) has broad discretionary power to grant hardship exemptions to the individual mandate penalty. If the Secretary of HHS determines that paying a dollar is an undue hardship, an exemption can be granted. Under this executive order, the hardship exemptions will be freely and frequently issued.

Now what does that mean? If we assume that very few people will need to pay the mandate penalty we should expect quite a few healthy people to leave the 2018 risk pool. Fewer healthy people in the risk pool means the proportion of people who have strong reason to believe that they will be expensive in 2018 will increase. That means the average premium will increase much faster as the risk pool will be proportionally sicker and more expensive with fewer healthy people to insure the sicker and more expensive individuals.

This will not have significant impact on the subsidized, on-Exchange enrollment as long as the premium tax credits are still tied to the cost of the second lowest Silver. The federal government absorbs the vast majority of the premium increase risk for the subsidized population. The issue will become apparent for the people who are buying off-Exchange where they do not get any subsidies. They bear the entire risk of increased premiums. As premiums increase, the healthy non-subsidized buyers will quickly make a decision to go uncovered as the expense does not justify the gain. Carriers will need to model a much sicker and more expensive single, unified risk pool as the non-subsidized portion of the risk pool will death spiral.

Section 3 deals with state based waivers. There are three major ACA waivers. 1115 is the Medicaid waiver program. 1331 is the Basic Health Plan waiver program. 1332 is the State innovation waiver. Section 3 makes as official policy maximum flexibility. 1331/1332 are mostly areas that Blue states would be interested in. 1115 is where the action is.

Louise Norris picked out the implication very quickly and clearly for Medicaid:

Anything will go for non-expansion state 1115 waiver applications. The Kentucky waiver will get approved with work/job training requirements. If this is the impetus to have Texas or Alabama expand Medicaid as it provides local political cover, then this could be a good thing even if it is not close to ideal.

47 replies
  1. 1
    Scamp Dog says:

    That “Lu” at the end–is that the start of a missing paragraph, or the remains of a paragraph you wanted deleted?

  2. 2
    lollipopguild says:

    Making America sicker again!

  3. 3
    rikyrah says:

    thanks for the explanation Mayhew.

  4. 4
    JordanRules says:

    Thanks Richard! So glad to have you and Adam added to the group of great front pagers here.

  5. 5
    Will Valverde says:

    It is a relief to see this presented without comment elsewhere, and know immediately I could come here for context and insight. The substance is a horrorshow, but at least I think I know the shape and name of the monster.

  6. 6
    Another Scott says:

    IANAL, but doesn’t Section 1 contradict Section 2? I mean, it’s it clear as day that if “tak[ing] all actions consistent with the law” meant gutting important provisions of the law (e.g. any tax, penalty, fee, etc.), then it’s self-contradictory, no?

    Any estimates of how many people would be immediately affected by Section 2?

    Is this the start of a “death of 1,000 cuts” attack, or is it more serious than that? Will the Healthcare stocks tank on Monday? ;-)

    Any idea what the 1115 changes would mean for Virginia (where the GOP has refused to do anything with McAuliffe’s proposals to expand Medicaid for 400,000 people)?

    Thanks. Your public analysis is very important and a great service.

    Cheers,
    Scott.

  7. 7

    @Another Scott: Section 1 I read as dicta. It has no instructions.

    Section 2 and 3 take advantage of the legal fact that the Secretary of HHS has very wide discretion to issue exemptions and change rules. Exemptions can be done (as far as I know) with minimal rule making process. That is where the mandate threat lies. It could be fairly rapid. Even if it is not rapid, it will scare the living bejesus out of actuaries tonight. Everything else has to go through rule-making, comment and OMB review but there is a lot that can get whacked via that route.

  8. 8
    RSR says:

    Thank you for working late on a Friday night when most of us are probably trying to escape/drown our sorrows.

  9. 9
    jonas says:

    So… shorter executive order: my HHS secretary (Tom Price, Beezelbub and his minions willing) can fuck with the ACA at will and just see what happens?

  10. 10
    Lizzy L says:

    So nothing will happen until the administration actually has an HHS Secretary.

  11. 11
    Ohio Mom says:

    @Will Valverde: My thoughts exactly, I knew if I stayed up just a little longer, Richard would be by to translate. Many thanks.

    When I saw the signing ceremony on the news, all they said was that the papers were to formalize the nominations. No word on this monkey wrench. Trump was enjoying himself, you could just see the thought bubble over his head, “Here I am, sitting at a big desk, signing important papers, lots of eyes on me. Just as I always imagined being president would be.”

  12. 12
    Another Scott says:

    @Richard Mayhew: Ok, thanks.

    We knew this was coming. CNN from September:

    “Regulations have grown into a massive job-killing industry. The regulation industry is one business I will absolutely put an end to on day one,” Trump said during an economic speech in New York earlier this month.

    Trump has also pledged to unwind Obama’s immigration policies on his first day, including having the “first piece of paper that I’m going to sign” be an order to get rid of criminal undocumented immigrants. He has also pledged to repeal “every single Obama executive order,” “repeal Obamacare” and “end the war on coal,” according to his running mate, Indiana Gov. Mike Pence. His transition chair, New Jersey Gov. Chris Christie, has told lobbyists in private meetings in DC that the transition team is focused on reviewing administration policies to look for everything that can be rolled back.

    If Donnie and the GOP want to destroy everything and have the votes in their party to do it, then it would be a huge mistake (IMO) to offer any Democratic help in trying to reduce the damage. The GOP is breaking our government and our social system and they are the ones who must pay the price for it at the next election.

    The Democrats should use every tool in the book to make it more difficult for Donnie to break everything, but if they succeed in their destruction, then it has to be on them. As I’ve ranted several times, today and earlier, the Democrats need to make them own this – alone. We have to be looking to the 2018 elections and winning there so that we can start the process of rolling back and repairing their damage.

    Cheers,
    Scott.

  13. 13
    Mike in NC says:

    Bannon sowing chaos on Day One of Caligula’s Reign of Terror.

  14. 14
    Le Comte de Monte Cristo, fka Edmund Dantes says:

    So in short, my cynical decision to blow off my. 12/16 premium (since my ongoing plan was dead and I already had ”17 coverage set up) saved me several hundred bucks. Good to know.

  15. 15
    Lizzy L says:

    @Another Scott:

    The Democrats should use every tool in the book to make it more difficult for Donnie to break everything, but if they succeed in their destruction, then it has to be on them. As I’ve ranted several times, today and earlier, the Democrats need to make them own this – alone. We have to be looking to the 2018 elections and winning there so that we can start the process of rolling back and repairing their damage.

    THIS. Yes. We should be calling every Democrat in the House and Senate, saying, If they do something good (for example, letting Medicare negotiate drug prices with Big Pharma, which T has talked about), support it. But otherwise, don’t help.

  16. 16
  17. 17
    jheartney says:

    So the point of this is to kill off the non-exchange individual market? Why would they want to do that? It’s just going to make the shitstorm the GOP faces for killing the ACA worse.

  18. 18
    Mary G says:

    "Wakefield’s license to practice medicine in the United Kingdom was stripped for “serious misconduct.” At Trump's ball. https://t.co/tCSrNLeVVA— Charles Ornstein (@charlesornstein) January 21, 2017

    “Only the very best people.”

    ETA: Notorious anti-vaxxer.

  19. 19
    NJDave says:

    Vox has another take.

    But this executive action on its own does not unravel the mandate on its own, or any other part of Obamacare for that matter. Instead, it sets up a long, drawn-out process to change the law’s rules — a unwinding process that takes time. And there are still major limits to how much Trump can do before Congress acts.

    “Trump is going to have to comply with law, and that doesn’t allow him to repeal the Affordable Care Act unilaterally,” health law expert Tim Jost, a law professor at Washington and Lee College, says.

  20. 20
    SiubhanDuinne says:

    Off topic, but may I just say holy fucketty fuck!? Just hearing the audio of T at one of the inaugural ballz and he has so far said that he loves everyone in the room “because you all voted for me, right?” and reiterated his hatred of the media.

    The man is not well, not well at all. “Why can’t all people be like that? Six questions and six congratulations.” “Did you hear my speech today?” “Even the media finally admitted that the crowds were massive.” He is sick in the head.

  21. 21
    Linda Binda says:

    Hi. Can someone tell me if this executive order affects my premiums with the health plan with my job?

    I’m a career mail handler and I work for the post office, and my plan is through Kaiser. My plan this year will be $65 per pay period. What could this do to what I pay now?

  22. 22

    @jheartney:

    2 reasons —
    1) Because they can
    2) It gives them a good talking point in August as insurers either bail or are defending rate increase requests of 25% or more

  23. 23

    @Linda Binda: No, your work insurance is not touched.

  24. 24
    MomSense says:

    Thank you, Richard. I’ll go tell Karoli to come over.

  25. 25
    Linda Binda says:

    Alright. Does this mean that, for every one in a state like Georgia, where I am …

    (John Lewis is my rep, and I live in a certain part of that district that even his other constituents, including my coworkers, would call “ghetto” — go ahead and guess where… BTW, MLK Weekend was fun for the news…)

    …a state where we never expanded Medicare, anyone who bought a plan from Healthcare.gov may pay more? Sorry if I’m being slow… I’m trying to take this slowly and as best as possible…

  26. 26
    Adria McDowell (formerly Lurker Extraordinaire says:

    Richard, delirking to ask, does any of this apply to TriCare? I’m certainly not complaining since we pay next to nothing, but since it’s “off Exchange” and also not work related health insurance (since my husband is retired), will those premiums go up too?

    Thank you for all you do.

  27. 27
    Steve in the ATL says:

    @NJDave: if a W&L guy says it, you know it’s right. Unless he’s one of the 70% of W&L guys who are hardcore republicans. I go to the reunions but not to the local alumni events, most of which are at the Piedmont Driving Club (Atlanta people know what tgat means).

  28. 28

    @Linda Binda: My impression is that the effect on Exchange Plans will be moderate rate increases, the effect on Medicaid will be to allow some states to turn it into a forced labor system for the poor, and the effects on non-exchange independent plans will be murder.

    Richard, what about people who are on-exchange but too well off to qualify for a subsidy? Also, I wonder who wrote this order. Because Trump didn’t—he doesn’t know enough. Any idea?

  29. 29
  30. 30
  31. 31
    Richard Mayhew says:

    @Raven Onthill: on Exchange above 400% FPL SOL in 2018

    Medicaid will get worse in Indiana and Kentucky but may expand in some hold out states

  32. 32
    Richard Mayhew says:

    @Linda Binda: if a person is subsidized on Exchange no big deal in 2018. No major change 2017

  33. 33

    @Richard Mayhew: Wow. that’s pretty much all successful independent contractors, artists, and musicians.

    #TFP

  34. 34
    cgp says:

    Based on his first “Executive Order”, expect the Republicans to essentially do anything they want, legislating vaguely, and relying on the court system to stop them when they go too far. It is exactly the way Trump operates. He abuses people to the point they have to use the court system to get their complaint redressed, wherein Trump has the full force of the government now to fight them.

  35. 35
    Chris T. says:

    I watched him sign the thing on the Maddow show. He looked at it, looked, looked, looked some more … finally Priebus had to point out to him where he was supposed to sign.

    It really does look like he can’t read well!

  36. 36
    Momofsam says:

    Looooong time lurker here. 1st time to comment. You guys have been my sanity tether for the last months. My outrage meter has been pegged at 11. Up at the crack of dawn to head into Boston for my 1st political action in a long time. My question to you is, has he just been played? Why would he a fix his name and his name alone to the 1st steps in dismantling a popular program that touches so many of his voters? And to do it as one of his 1st actions.

  37. 37
    Luthe says:

    @Momofsam: Because the word “Obama” was attached to it.

    Question for the room: what do we think will happen to those who need Medicaid but are too sick to work? How will they fall into the new work/job-training regime?

  38. 38
    Ben Vernia says:

    Thanks for the informed view on this. I had (mistakenly) interpreted it as Vox did – i.e., the caveats about existing law and not overturning regulations being somewhat comforting.

    Section 4 appears aspirational for now, but the aspiration is for an interstate health insurance that would quickly become a race to the bottom (the bottom being defined by the laws of the state whose insurance commissioners are most pliable with hookers and blow).

  39. 39
    Lurking Canadian says:

    @Momofsam: He did manage to get himself elected President by promising to repeal it on his first day. It may (and I hope will) come around and bite him later, but right now he has no evidence to indicate that this will hurt him.

  40. 40
    ska delite says:

    @Ben Vernia: I would be interested to know what those states are.

  41. 41

    “…the non-subsidized and off-Exchange portions of the risk pool…”

    How many people is that? I’m one of them; I went with an off-Exchange plan for 2017 because the only Exchange plan in my state had a bad (for me) network. But how many others?

  42. 42
    Ben Vernia says:

    @ska delite: Maybe NC? They just voted in a GOP insurance commissioner there.

  43. 43
    Ben Vernia says:

    Richard – Since I’m a DC lawyer, I kicked this around in my head during my morning run. My gut instinct on preserving the ACA is that we should miss no opportunity to go on the attack – and not presume that a repeal is imminent. I am wondering whether the executive order might be open to a suit for an injunction. Here’s my reasoning, and I’d appreciate your thoughts.

    As I understand it, the “hardship exemptions to the individual mandate penalty” come from 26 USC 5000A, but the standards for those are currently governed under 45 CFR 155.605. (I’m only about 50% sure I’ve read this correctly, however.) The regulation was issued in compliance with the notice and comment provisions of the Administrative Procedures Act. If that’s all true, then as I understand Executive Order and APA law, Trump cannot unilaterally relax the standard via an EO. HHS would have to issue a proposed rule, solicit public comment, etc.

    Assuming that one could identify and enlist a plaintiff with standing (e.g., someone who buys insurance on an exchange), couldn’t one argue that the implementation of the EO would likely create a death spiral in the individual market, and that because it was issued in violation of the APA (see, for example, Texas v. US, the Fifth Circuit case upholding the nationwide injunction against President Obama’s immigration policy), it should likewise be enjoined?

  44. 44
    low-tech cyclist says:

    The webpage for executive orders at whitehouse.gov is still blank, despite his having issued at least this executive order. (I figured I should check it to see what else Trump had signed with those short fingers.) Apparently Trump’s IT staff isn’t on the ball.

    (Note: all the Obama stuff is gone because each new President gets a fresh, clean whitehouse.gov with no evidence of his predecessor. This happened when Obama succeeded Bush 8 years ago, too.)

  45. 45
    Another Scott says:

    @low-tech cyclist: The Obama Whitehouse web page was archived in multiple places, including the National Archives.

    You can find it here: ObamaWhiteHouse.Archives.gov.

    HTH.

    Cheers,
    Scott.

  46. 46

    […] of Duke, who, writing pseudonymously as Richard Mayhew at his old post at balloon-juice.com, was rather more uneasy about how this will affect the risk pool. “Carriers will need to model a much sicker and more […]

  47. 47

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