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:
— Louise Norris (@LouiseNorris) January 21, 2017
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.