Actuaries outline perils of deregulating insurance markets

Health insurance, pen and stethoscope
Association plans have been successful within states in the past, but selling plans across state lines could pose significant challenges due to uneven infrastructure and provider networks, one expert says. (Getty/Minerva Studio)

President Donald Trump says his newly signed executive order will result in “lower costs and more options in the healthcare market,” but actuaries aren't so sure. 

The order—which Trump signed just hours before his administration announced it would also end cost-sharing reduction payments to insurers—seeks to expand the use of association health plans, short-term insurance policies and health reimbursement accounts.

In order to do so, federal regulators would have to relax some of the Affordable Care Act’s regulations on insurance plans, which experts say could be problematic. 

“Creating exemptions from the Affordable Care Act insurance market rules can have far-reaching and unintended effects,” American Academy of Actuaries Senior Health Fellow Cori Uccello said in a statement.

RELATED: Provider groups decry Trump's 'all-out assault' on ACA

One of the main problems is adverse selection. Healthier, lower-cost groups could establish association health plans (AHPs) and leave higher-cost and less healthy groups in the traditional insurance market, which in turn would drive up premiums, the group said. And short-term plans that are not subject to ACA requirements could attract lower-cost individuals, hiking premiums for ACA-compliant coverage.

Further, bankruptcies could result from “uncertain or conflicting” rules regarding association health plan solvency requirements, and without a defining regulatory framework for AHPs, there could be uncertainty as to whether consumer protection laws apply to enrollees in those plans.

Society of Actuaries Fellow Dave Dillon had similar concerns, noting that “there will likely be an increase in solvency risk for association health plans, contributing to market instability.”

Association plans have been successful within states in the past, but selling plans across state lines could pose significant challenges due to uneven infrastructure and provider networks, he added.

RELATED: Association health plans, a favorite GOP approach to coverage, poised for comeback

Dillon did note that Trump’s proposal would offer consumers more coverage options, but he cautioned that the effects wouldn’t be felt equally. While healthy consumers could have greater access to lower-cost plans, more medically complex consumers could be subject to significant rate increases.

Given all these concerns, the consequences for consumers and insurers must be well understood and addressed before the departments of Labor, Treasury and Health and Human Services issue any regulations related to Trump’s order, the American Academy of Actuaries said.

Careful attention must also be paid to educating potential enrollees, Dillon added, saying “without a market structure stipulating benefit coverage, it’s crucial for consumers enrolling in coverage to understand the nature of the benefits offered in the plans they choose.”