President Trump is intent on repealing Obamacare. If there were any doubts to the contrary, one of his first official actions in office was to sign an executive order to “minimize the unwarranted economic and regulatory burdens of the [Affordable Care] Act.” That order grants the Secretary of Health and Human Services, the Centers for Medicare and Medicaid, the Department of the Treasury, and the IRS all authority available under the current law of the ACA to roll back the pieces that make it work.
What could such an order actually accomplish? At first glance, the executive order might look like a symbolic gesture, since the secretary cannot do anything outside of the bounds of the law. But the incoming Secretary of Health and Human Services—presumably nominee Tom Price—has some broad powers granted by the Act itself and sometimes exercised by the Obama administration that could have significant effects on the law, and eventually destabilize health care enough to require a repeal and replacement.
The part of Trump’s executive order that directs the secretary to “waive, defer, grant exemptions from, or delay the implementation” of pieces of the law is probably the most worrisome component for supporters of Obamacare. The irony of that component is that it rests on precedent set by the Obama administration, which used executive and regulatory power liberally to make the law work in the face of Republican opposition. The most likely actions under the new executive order expand or reverse Obama-era decisions.
The first and most important of these is the “hardship exemption” from the individual mandate. After the Medicaid expansion to low-income adults was made essentially optional for states after the NFIB v. Sebelius Supreme Court decision, the law left millions of people in non-expansion states in a “coverage gap” with too little income to qualify for exchange subsidies and too much to qualify for Medicaid. Under the mandate, they would have had to pay a penalty for not having insurance, but the Obama administration extended the “hardship exemption” to them without the need of legislation.
The Trump administration could stretch this precedent to grant hardship exemptions to people in places where insurers are leaving markets, or to those facing premium hikes. It could also offer more authority for insurance plans to sell products on the exchanges that don’t meet ACA minimum-coverage requirements, a strategy already pursued by Obama’s 2013 “administrative fix” that allowed some enrollees to keep their plans, even if they didn’t meet ACA standards.
The executive order could also provide more employers with exemptions from the requirement to provide coverage. The Secretary of Health and Human Services will almost certainly grant broader Section 1115 Medicaid waivers to states that can allow them tighter control and less regulatory burden over how they administer and finance Medicaid programs. Those waivers could also allow states to essentially offload more of their publicly-financed insurance programs into privately-managed schemes, or establish provisions like work requirements for coverage. Those provisions would essentially shrink the number of people eligible for Medicaid and probably reduce the number of benefits their insurance provides.
Depending on how far it takes hardship exemptions and relaxation of minimum-benefits plans, the administration could easily weaken the individual mandate just enough to provide whispers of death spirals, especially since it cannot touch the requirement for insurers to cover people with pre-existing conditions. These actions don’t have to kill the mandate to work; they just have to weaken it enough to shake insurers’ and consumers faith in the markets. If insurers and healthy enrollees exit the marketplaces, then premiums will skyrocket for sicker patients—if they have any available insurers left.
Such exemptions would in essence create a hard time-limit for the debate over an Obamacare replacement, since they promise a chain reaction of insurer exits and sickening risk pools. The main constraint to this ambition is legality: Hardships must still actually qualify as hardships, and exemptions can’t fundamentally alter the spending and general shape of the law. And weakening the individual mandate enough to cause death spirals would almost certainly give both insurers and enrollees cause to sue.
But unraveling standing and jurisdiction issues for such complex laws, as well as establishing potential classes for those lawsuits might be expected to take a long time, and the Trump administration could severely weaken the law well before they even enter courts. The threat or eventuality of lawsuits may not be enough to stop aggressive action. The real, immediate limitation appears to be how much the new executive branch actually wants to destabilize markets and disrupt the way coverage works for millions of people.