Congress failed to overhaul the Affordable Care Act this year, so the Trump Administration is trying to dismantle the signature Obama-era law on its own.

President Trump signed an executive order on Thursday that could bring sweeping changes to the individual health insurance marketplace, giving consumers the option to buy cheaper but less comprehensive plans.

The executive order calls for:

  • Allowing small employers in the same line of business anywhere in the country to band together to offer health insurance to their employees. These association health plans (AHP), which already exist in some states, would no longer be subject to the same strict requirements as ACA plans, such as the requirement to cover prescription drug costs. 
  • Giving people the option to buy low-cost, short-term health insurance coverage for up to one year. Under the ACA, this kind of temporary insurance, which offers very limited coverage, is available for up to three months to help bridge periods without comprehensive insurance (because of a job change, for instance).
  • Expanding Health Reimbursement Arrangements (HRAs), which employers use to contribute pretax money on behalf of employees to help them cover their premiums and out-of-pocket costs for deductibles and co-pays.
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Both association and short-term plans could be less expensive than ACA plans. That could be attractive to healthier people who don’t qualify for financial subsidies to offset the steep cost of premiums and deductibles. 

But these new insurance options would come with significant trade-offs, says Kevin Lucia, a research professor at Georgetown University’s Health Policy Institute. “If you’re younger and healthier, you may pay less for insurance. But if you get sick, these plans may not cover the cost of the care you need,” he says.

These plans could also undermine the ACA exchanges by siphoning off healthier people and leaving ACA insurers with a more costly pool of people, Lucia adds. That would push up the cost of individual insurance and drive insurers out, ultimately leaving consumers with fewer choices.

It could also cost the federal government more, Lucia says. About 85 percent of people who buy insurance on the ACA exchanges get subsidies to reduce their premiums. They’ll be insulated if premiums rise on ACA plans. The government, however, will have to give out larger subsidies to cover those bigger premiums.  

Consumer advocates say the changes won’t improve consumers’ access to affordable health insurance. “Permitting the sale of association health plans means more people will have junk insurance—coverage that may seem affordable but actually covers very little. Consumers could be on the hook for huge out-of-pocket costs,” says Betsy Imholz, special projects director for Consumers Union, the policy and mobilization division of Consumer Reports. She also believes turning short-term plans into long-term renewable coverage only exacerbates this problem.

The executive order doesn’t have a lot of detail, but based on what is known, here are answers to questions you may be thinking about.

Q: I’m going to be choosing my health insurance plan for 2018 soon. Will this affect my options for next year?

No. The sign-up period for people who want to buy individual insurance for 2018 kicks off Nov. 1. The executive order only asks for federal agencies to consider the changes. It’s up to the departments of Labor, Health and Human Services, and Treasury to determine whether and how they could implement the executive order. It takes months for agencies to write regulations, which must be put out for public comment for several months. The regulations are likely to face legal challenges by consumer groups and insurers who oppose them.

Q: How are association health plans different from the individual health insurance I can buy today?

AHPs would not have to offer the 10 benefits that individual health insurance plans are currently required to offer, including mental health coverage, substance abuse treatment, and maternity care. Association plans would be treated more like large-employer plans that are subject to fewer regulations. 

Q: What will AHPs be required to cover?

Association health plans would still offer some important consumer protections. They can’t exclude people from the plan or base premiums on health status. They must also offer coverage to dependent children up to age 26, have no annual or lifetime caps, and must offer certain preventive health services with no co-pay. These are provisions of the Affordable Care Act law that new regulations can’t change.  

Q: Can individuals buy into an association health plan?

Maybe. Association health plans are meant for small employers to band together with other small employers in the same line of work to buy insurance together that they can offer to employees. It’s unclear whether self-employed individuals in the same trade will be able to buy the association plans.

Q: What's so bad about a short-term health plan?

Their benefits are so limited that if you get sick, the insurance might not cover you, and if you develop a condition that’s considered pre-existing, your policy might not be renewed. The plans are not required to offer the ACA-required menu of 10 essential health benefits or limit how much consumers must pay toward medical costs. According to the Commonwealth Fund, the four best-selling short-term medical plans sold on eHealth.com exclude coverage of preventive services, maternity care, mental health and substance use services, and prescription drugs.

Q: Will I still have to pay a tax penalty if I don’t buy insurance?

Yes. Congress would have to repeal the individual mandate, which requires individuals to buy qualified health insurance plans or pay a penalty: $695 per adult and $347.50 for a child under 18, but no more than $2,085 per household.

Q: Is President Trump planning other changes?

Yes. Administration officials say this is just the first of several actions it wants to take in the next few months to overhaul the insurance market and reduce health insurance costs.