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How Trump's Executive Order Impacts the Future of the Affordable Care Act

Written by Kaitlyn Houseman | January 26, 2017

President Donald Trump signed an executive order Friday aimed at lessening the economic burden of the Affordable Care Act (ACA) as lawmakers work on a repeal and replacement plan. Here's what healthcare experts are saying about the impact of the executive order on the Affordable Care Act.

The Executive Order Offers Broad Guidance

While the executive order lacks any specific or targeted details, it does direct the Health and Human Services secretary and the heads of other agencies to minimize the financial burden of Obamacare on Americans, states, insurers, health care providers and others to the maximum extent permitted by law.

Timothy Jost, a professor at Lexington, Va.-based Washington and Lee University School of Law wrote in a Health Affairs blog, "In sum, nothing happens yet, nor is it likely to happen until the heads of HHS, Treasury, and probably Labor, as well as the CMS Administration and IRS Commissioner are in place; even then it will take a while for changes to be put into motion."

New Types of Hardship Exemptions

It seems that Trump is aiming at the individual mandate that requires nearly all Americans get insurance or face a penalty.

"What President Trump is doing is, he wants to get rid of that Obamacare penalty almost immediately, because that is something that is really strangling a lot of Americans to have to pay a penalty for not buying," Kellyanne Conway, Trump's senior adviser, said on ABC News "This Week" on Sunday.

Loosening the criteria for a hardship exemption would allow more people to remain uninsured and create chaos in the insurance market. Healthy people would be prompted to not buy coverage and insurers would ultimately pull out.

"If the secretary of HHS determines that paying a dollar is an undue hardship, an exemption can be granted,” observes David Anderson of Duke. “Under this executive order, the hardship exemptions will be freely and frequently issued.”

With loose waivers, Anderson reckons, “we should expect quite a few healthy people to leave the 2018 risk pool …. 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.”

Greater Flexibility to States to Run Their Own Health Care Programs

The executive order signals "Section 1115 Medicaid waivers will be granted more liberally, but that was expected, and until they are changed, 1115 waiver regulations promulgated by the Obama administration will continue to apply," according to Mr. Jost. Section 1115 Medicaid waivers allow states to implement their own budget-neutral expansions of Medicaid and CHIP coverage and determine who and what the programs cover.

Medicaid expansion was a key part of the Affordable Care Act's coverage expansion but Trump has stressed block grants in the past. In fact, block grants were one of the few healthcare specifics in Trump’s recent interview with Axios.

“Whether it's Medicaid block grants or whatever it may be, we have to make sure that people are taken care of and it's going to be a very important part to me,” Trump said.

Federal block grants are, by definition, an arbitrarily capped amount of federal funding that go to states in the form of a lump sum payment and fail to adjust for population growth, economic changes, public health crises, or natural disasters such as hurricanes, tornadoes, etc.

Republicans say block grants would limit federal spending and give more power to the states. But Democrats warn that limiting the spending would simply mean damaging cuts to the program, keeping people out of coverage or slashing benefits.

Right now, it's unclear how Trump's replacement plan will compare to the Medicaid expansion under the ACA while also keeping the repeated promises to not leave millions of Americans without insurance.

"For the 20 million who rely upon the Affordable Care Act in some form, they will not be without coverage during this transition time," Conway said on Face the Nation Sunday.

It Encourages Interstate Insurance Markets.

The Affordable Care Act currently includes provisions to encourage regional and national healthcare insurance sales. However, state laws, not federal ones, restrict local insurance competition.

Some states, including Georgia, have passed laws that allow insurers to sell any policies locally that they offer in other states. But since the law was passed in Georgia five years ago, no health insurer has taken advantage of it.

Trump believes that lower costs can be achieved through more competition and this is one of the main goals listed in the order to be executed to "the maximum extent permitted by law." 

Ms. Conway confirmed this in her interview with ABC Saturday. "[H]e's going to replace this with a plan that allows you to buy insurance across state lines, that is much more centered around the patient and [improves] access to healthcare," she said.

The Order Could Also Undo Some Taxes Under the ACA.

According to Politico, the order says Cabinet heads "shall exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay" any provision in the Affordable Care Act that would impose a "cost, fee, tax, penalty or regulatory burden." This means the executive order could undo some taxes under the ACA like taxes on the wealthy, as well as industry taxes on health insurers and drug makers that helped finance Obamacare’s major coverage expansion.