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Trump just took a big step to unravel Obamacare
Business Insider10/12/2017 11:08:00 AM

President Donald Trump on Thursday signed an executive order to unwind parts of the Affordable Care Act, taking unilateral moves after Congress was unable to legislatively overhaul the US healthcare system.

Trump signed an order that would allow the use of association health plans and short-term insurance plans. The order includes broad language instructing various departments to look at ways to reduce insurance costs.

Trump made it clear during a ceremony where he signed the order that the action was designed to undermine Obamacare and start to unravel the law.

"We've been hearing about the disaster of Obamacare for so long, in my case most of it outside in civilian life and a long period of time since I started running and for a long time since I became president of the United States," Trump said. "I just keep hearing repeal-replace, repeal-replace. Well, we're starting that process."

Association health plans allow people in the individual or small group markets to pool together to purchase insurance at a more favorable rate. According the the report, these plans will also not be subject to certain Obamacare regulations, helping make them even cheaper for people participating.

In addition, the order is expected to instruct the Labor Department to look into allowing the sale of these insurance plans across state lines. Trump has long espoused the idea of selling insurance across state lines, but there are doubts about how effective it would be in actually bringing down costs.

Short-term insurance plans are cheap but cover little. The Affordable Care Act prevents people from buying these plans for more than 90 days, but the new order could allow people to purchase them for up to a year. 

Both aspects of the executive order appear to be targeted at allowing healthier, younger people to obtain lower-cost options than what is currently available in the Obamacare exchanges. Trump said this would allow "millions of people" to get cheaper health insurance.

Experts say that while some healthy people would see costs go down, the order could leave behind older and sicker people currently are getting insurance through the Obamacare markets.

"Loosely regulated association plans could charge lower premiums to healthy people, effectively leaving ACA marketplaces as high-risk pools," tweeted Larry Levitt, senior vice president at the Kaiser Family Foundation, a nonpartisan health policy think tank.

Levitt continued: "With this executive order healthy people could pay less for insurance, but middle-income people with pre-existing conditions pay more."

That means healthier people would rely on the cheaper, deregulated plans allowed under the new rules. Since sicker people would need more generous plans, they would likely remain in the more regulated Obamacare exchanges.

As the percentage of sick people in the exchanges increases, it would be more costly for insurers in that market. And as costs increase, so too would the prices insurers charge in the exchanges.

The final order, however, appears to only allow small businesses to use these association health plans, not individuals. This could mute some of the negative impact on the exchanges since it would apply to fewer people in the individual marketplace.

Additionally, the final rules that come out of this order will have to be crafted by the relevant agencies and go through the normal approval process. This likely means they would go into effect for the 2019 insurance year at the earliest.

With the collapse of the Republican attempts to repeal and replace Obamacare, Trump signaled over the last few weeks that he would consider executive actions to reshape the insurance market as well as potential bipartisan deals.

The president held a call with Senate Minority Leader Chuck Schumer last week, tweeted about the call and a possible healthcare deal on Saturday morning, and then reiterated the possibility of a deal to reporters as he departed the White House for an event in North Carolina on Sunday.

Schumer immediately hit back at the executive order, saying that it would result in worse coverage for many Americans.

"Having failed to repeal the law in Congress, the president is sabotaging the system, using a wrecking ball to single handedly rip apart our health care system," Schumer said in a statement. "This executive order is just the latest in a series of steps he has taken to sabotage the health care system at the expense of millions of Americans."

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