Havoc

The wire services are abuzz with news that President Trump, the guy who campaigned in part on his disdain for President Obama’s use of the Executive Order, is poised to sign another Executive Order dealing with health insurance. Frustrated and confused by the Republican controlled Congress’s inability to simply pass any unvetted, purely political legislation regardless of the potential harm it might do to both the economy and the public’s access to care, Donald Trump is more than willing to take matters into his own hands.

The word for today is ASSOCIATION. Associations are not inherently good or bad.  In fact, we have had the term Association within the health insurance lexicon for years.  Small businesses in the Greater Cleveland area have joined COSE (Council of Smaller Enterprises) or NOACC (Northeast Ohio Area Chamber of Commerce) to get a discount on their group health insurance policies.  The discount was often no more than the premium tax that wasn’t assessed on an association group contract.  The businesses were still subject to health underwriting and the policies conformed to Ohio regulations.

I used to write health insurance on certain hardware stores. The stores were part of a franchise and the owners were given guaranteed access to an association health policy, the association of XXXX Hardware Stores.  It didn’t take long for some of the owners to realize that if they and their employees had better than average health, they could purchase a group policy in the open market.  The guaranteed issue, no health questions asked association policy became the insurer of last resort.  The healthy bailed out until the only ones left were the most expensive to insure.

The difference between these two types of associations is that in the first example association members and non-members were on equal footing. The only thing different was the absence of a premium tax, which may or may not have been as much as the membership fee into the organization.  In the second example, one path led to a health insurance policy that was selective and rewarded the healthy and/or punished the sick while the other path led to a policy that charged everyone the same price regardless of risk.

The more open, less selective plan was doomed to failure.

Senator Rand Paul (R-KY) has long championed a version of the association health insurance model.  His option would allow businesses or individuals to form associations specifically created to avoid the regulations and consumer protections of The Patient Protection and Affordable Care Act (Obamacare).  And President Trump appears to be ready to sign off on this.

The Paul / Trump associations will offer flexibility and lower premiums and will be hailed as a consumer benefit. There are two ways that these association policies can save money and both center on flexibility.

1. The policies will have the flexibility to eliminate a broad range of coverages for particular illnesses. The rush to the bottom will feature policies that fail to cover specific conditions or will place limits on the amounts paid.
2. The policies will have the flexibility to ask health questions and choose to insure only the healthiest individuals and groups.

And who does that leave on the outside looking in? The unhealthy, the older worker, and eventually everyone who might be a worse than average risk.  In other words, the unlucky.  And the unlucky will be trapped in a health insurance death spiral consisting of individuals and families dependent upon the good graces of a system that was initially designed to spread risk across the broad spectrum of American citizens.  There is a reason why the National Association of Insurance Commissioners (every state has one) has adamantly opposed this type of association health policy.  Someone has to look out for the American consumer.

My friend and fellow agent, Barb, heard about this possible change and exclaimed, “It will be just like it was where people with preexisting conditions can’t get covered!”

So a couple of quick questions:

Can he really wreck this much havoc on 20% of the economy without Congressional approval? YES.

Are you young enough, healthy enough, and lucky enough to not be hurt by this? HOPE SO.

DAVE

www.cunixinsurance.com

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