Hospital Impact: The implications of Donald Trump’s ACA executive order

White House
While a presidential executive order has little if any legal impact, it does send a clear message to governmental agencies about the ACA.
Jonathan H. Burroughs headshot

Last Friday, newly inaugurated President Donald Trump signed his first executive order targeting the Affordable Care Act “to minimize the unwarranted economic and regulatory burdens of the act, and prepare to allow the states more flexibility and control to create a more free and open healthcare market.”

The heart of the executive order instructs the secretary of the Department of Health and Human Services and all federal agencies to “exercise all authority and discretion available to them to waive, defer, grant exceptions from or delay the implementation of any provision or requirement of the act that would impose a fiscal burden on any state or a cost, fee, tax, penalty or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare insurance, purchasers of health insurance, or makers of medical devices, products or medications.”

While a presidential executive order has little if any legal impact, it does send a clear message to governmental agencies about the further development of policies and regulations that may impact the implementation of the ACA and its many complex provisions.

What is the potential impact of this executive order on healthcare practitioners, organizations and payers in the days and months to come?

Enforcement of the individual and employer mandate

Many take issue with the federal requirement that both most individuals and employers with more than 50 full-time employees purchase “minimum essential healthcare coverage” or pay a tax penalty. In some cases, both individuals and employers have chosen to pay the penalty either in protest or because the penalty is less costly than the coverage. The executive order clearly paves the way to exempt individuals and employers from this provision. But that will increase the number of uninsured individuals in this country and will transfer the burden of payment onto healthcare providers and systems that will be forced to continue cost shifting onto the backs of paying customers.

For payers, the loss of healthy covered lives will concentrate the “risk pool” (as sicker individuals tend to purchase insurance out of necessity) and increase the cost of providing insurance to everyone.

Preexisting conditions

Many have been warned to purchase healthcare insurance while the ACA remains in effect so as not to lose the “pre-existing condition” requirement that prohibits payers from excluding high-cost individuals who are both unprofitable and drive up the concentration of the risk pool. This is a delicate issue, as insurance companies are frustrated that individuals only purchase policies when they get sick, thus increasing the difficulty in managing actuarial risk for everyone. But individuals want the freedom to choose to buy insurance when the need arises—so the political stakes are high.

Desire of insurance companies to underwrite coverage in exchanges

While the health insurance industry is predicted to be stable through the beginning of 2018, many companies may now consider dropping out of the individual marketplaces altogether due to the potential loss of federal subsidies for both beneficiaries and insurance companies themselves. There is still the vestige of a monopoly in the individual marketplaces: In states that use, the average number of insurers participating in the marketplace will be 3.9 in 2017, down from 5.4 companies per state in 2016, according to the Kaiser Family Foundation. This defeats the hope of “across state lines” free market competition, so it will be interesting to see how the administration and Congress reconcile this potential conflict to encourage a more market-based healthcare economy.

Medicaid expansion by the states

Conservative states are torn between their opposition to federal control and the opportunity to receive significant federal subsidies to expand their Medicaid programs. Many Medicaid programs are poorly administered, demonstrate cost overruns and result in significant state deficits. But progressive Medicaid programs (e.g., Oregon, Colorado and Minnesota) demonstrate that by aligning physicians, healthcare organizations and Medicaid beneficiaries, costs can be significantly reduced and quality outcomes achieved. Many states may either abandon Medicaid expansion or have to significantly redesign their programs to ensure that individuals below 400% of the federal poverty level can receive affordable healthcare coverage and services.

State versus federal rights and control

Many feel that the strong Republican opposition to the ACA is less about specific healthcare provisions and more about the balance between state and federal control—akin to how the election of Andrew Jackson as president in 1828 represented a populist revolt against the dominance of the Federalists. Dismantling unpopular provisions of the ACA, such as the Cadillac tax and the tax on durable medical equipment, will be easy compared with the difficult task of symbolically unwinding the federal law while preserving the key aspects that have enormous economic and political consequences. These include at least 20 million new covered lives, coverage of minor dependents until the age of 26, protection of beneficiaries with preexisting conditions, the support of free market insurance competition and the necessity to have healthy individuals participate in insurance pools to lower the cost of coverage.

Trump’s executive order is a clear message, but the implications of how it is carried out will be both complex and contradictory.

Jonathan H. Burroughs, M.D., MBA, FACHE, FAAPL is a certified physician executive and a fellow of the American College of Healthcare Executives and the American Association for Physician Leadership. He is president and CEO of The Burroughs Healthcare Consulting Network and works with some of the nation's top healthcare consulting organizations to provide "best practice" solutions and training to healthcare organizations.