Executive Order Is No Substitute for Obamacare Repeal, Experts Say
Efforts to let insurance companies sell policies across state lines unlikely to make much difference
An executive order promised by President Donald Trump to increase competition in the health insurance market is no substitute for repealing Obamacare, according to conservative health policy experts.
Thwarted by the Senate on health care legislation, the president is turning toward executive power to at least partially fulfill a key campaign promise. He told reporters at the White House on Tuesday that he would sign an executive order this week that is “going to go a long way to take care of people that have been so badly hurt on health care.”
Trump will sign the executive order Thursday at 11:15 a.m. in the Roosevelt Room.
The president promised his order would allow people to buy insurance across state lines, a reform he embraced on the campaign trail. Reportedly, the executive order also will also make it easier for people to form health insurance cooperatives to get better insurance prices.
Edmund Haislmaier, a health policy expert at The Heritage Foundation, tempered expectations for quick change after Trump acts this week.
“The executive order itself isn’t going to do anything,” he said.
Instead, he said, it likely will take the form of instructions to federal agencies about how to reinterpret the law.
Hoping small changes in insurance will produce a dramatic reduction in premiums, said Haislmaier, ignores the fact that insurance costs are driven to a large degree by the cost of medical care. Under Obamacare, at least 85 cents on the dollar must go to pay claims. This limits how much savings can be achieved by changes the president can make through executive orders.
He said the impact of allowing cross-state sale of insurance would have been bigger before Congress passed the Affordable Care Act because regulations varied greatly from state to state. Theoretically, a resident of a high-regulation state like New York might have taken advantage of a lower-priced plan in a low-regulation state like Idaho.
But Obamacare imposed so many rules at the federal level, Haislmaier said. “It makes the differences between states smaller than they used to be.”
Haislmaier added that the reform could have been more meaningful as part of comprehensive legislation.
“If we had let states get out from all of the regulations, it would have made bigger impacts,” he said.
Robert Graboyes, a senior research fellow and health care scholar at George Mason University’s Mercatus Center, agreed.
“It’s unlikely to have really any significant impact … It’s certainly not something that’s going to be a tremendous cost saver to do so,” he said.
Graboyes said he was skeptical even before Obamacare that cross-state insurance sales would make much of a difference.
“Since the Affordable Care Act, it’s even weaker,” he said. “I never thought it was practical.”
Graboyes said any insurance company that wants to sell in multiple states already does so by getting licensed in different states, as the Blue Cross companies do.
Using the example of New York and Idaho, Graboyes questioned whether an insurance company in Idaho would want to set up a whole network of health care providers in New York.
“Even if they did, the legalities would be nightmarish,” he said.
Graboyes said Georgia once tried to attract out-of-state insurance companies to sell health policies.
“They got no takers,” he said. “Health insurance is an intensely local good.”
The other reform that is part of Trump’s promised executive order, co-ops, could make a bigger difference, said Graboyes. The idea, as pushed for months by Sen. Rand Paul (R-Ky.), is to let farmers or other groups form health associations that could negotiate better prices than they could get in the individual market.
But Graboyes said that if the idea were to take off, it might pull younger and healthier people out of the Obamacare exchanges, essentially turning them into high-risk pools. Because Obamacare has struggled to attract those kinds of customers even without an alternative, he said, the exchanges already function as high-risk pools to some extent.
Haislmaier said buying health care is not like buying bags of flour at Costco.
“Bulk buying power is often overrated and not the best way to get better value in health care,” he said. “As a rule, in health care, that’s not the necessarily the best way to go about saving money because it’s not buying a commodity.”
Rep. Mo Brooks (R-Ala.) agreed that executive action contemplated by Trump is no substitute for repealing Obamacare.
“But it is incremental progress,” he said.
Brooks questioned whether the president has the legal authority to do what he wants to do with respect to cross-state insurance sales and health associations. But he said it would improve on the current system.
“Competition is always a good thing,” he said. “Sometimes competition has a major impact on pricing. Sometimes it has a minor impact on pricing. But it always has a positive impact for consumers.”