One of President Trump’s first acts as President was to issue an executive order on The Affordable Care Act (ACA or Obamacare). Many are wondering what this actually means for the ACA. Most importantly, the ACA cannot be repealed with executive action alone. Furthermore, while executive orders can pave the wave for further action, most changes would need to be completed through formal regulation and guidance issued by agencies within the executive branch (e.g., Department of Health and Human Services, Department of the Treasury, Internal Revenue Service), which requires public comment, and thus cannot happen overnight.

What does the executive order say?

The key themes are summarized in the first section:

It is the policy of my Administration to seek the prompt repeal of the Patient Protection and Affordable Care Act (Public Law 111-148), as amended (the “Act”). In the meantime, pending such repeal, it is imperative for the executive branch to ensure that the law is being efficiently implemented, take all actions consistent with law to minimize the unwarranted economic and regulatory burdens of the Act, and prepare to afford the States more flexibility and control to create a more free and open healthcare market.

Beyond calling on Congress to move forward with repeal, there are three key themes that are elaborated on in the executive order, asking the executive branch agencies to:

  1. Reduce economic and regulatory burden for states, providers, and consumers.
  2. Provide greater flexibility to states to implement health care programs.
  3. Encourage free market principles including interstate commerce for health insurance and health care services.

None of the themes are particularly surprising. Rather, they are consistent with the rhetoric of Republican principles for health reform. Notably, the executive order specifies that all of this needs to be done within existing legal authority. So, effectively this executive order spells out that these are the principles that the Trump Administration wants to embed in the ACA as much as possible, while it remains the law of the land.

What are the implications of this executive order?

The general consensus is that this executive order actually does very little, but it is symbolic. We have all heard Trump’s repeated promise on the campaign trail to undo what he calls the “horrible” impact of Obamacare. His transition website says, “On day one of the Trump Administration, we will ask Congress to immediately deliver a full repeal of Obamacare.” So, this executive order checks that “ask” off the list. He is proclaiming it as official administration policy to undermine the law and making a public statement—look, I am following through on what I said I would do.

The other potential implication of the executive order is giving executive agencies the go ahead to weaken the impact of existing regulations where they can, and perhaps down the line to issue new guidance (a less formal and time intensive procedure than rulemaking). While some of the press coverage of the impact of the executive order suggests President Trump’s action could “gut” or “dismantle” Obamacare, what can actually be accomplished without further regulatory activity may be a bit more nuanced. Still, there is concern that because President Obama used broad executive authority to implement parts of the ACA, this broader executive authority could potentially work in President Trump’s favor as he seeks to dismantle the law. In this sense, one analyst suggests that once confirmed, the Secretary of Health and Human Services could use existing powers to “eventually destabilize health care enough to require a repeal and replacement.” So, while the executive order itself does not do much on its own, it does provide marching orders for the executive branch that could undermine the ACA and its beneficiaries. Let’s focus on two particular aspects of the ACA that could change through executive action: the individual mandate and Section 1332 waivers.

Weaken the individual mandate

As a NYTimes piece explains, with help from Tim Jost who has analyzed this issue in detail, individuals need to submit a hardship request to be exempt from the penalty for not having insurance, as required by the individual mandate. The Administration could choose to lessen the burden of demonstrating a “hardship” for exemption. Still, the process of requiring people to submit a hardship request would remain. Existing regulations specify what constitutes a hardship, so there are limits to changes that the Administration could actually make without rewriting the regulations. After the Supreme Court ruling that made the Medicaid expansion optional, the Obama Administration added specific hardship exemptions into regulation for people who would have been eligible for Medicaid if their state had chosen to expand coverage. Keep in mind that if the individual mandate goes away, either through Congressional action or weakening on the executive side, this could negatively impact health care markets.

Why does the individual mandate matter so much in the ACA?

If you are going to require health plans to offer insurance to sick people and not charge them higher premiums for being sick, you also need to make sure that healthy people have an incentive to sign up (i.e., a mandate). Otherwise, you will just enroll sicker people, and the risk pool will not have effective redistribution, resulting in higher health care costs and rising premiums. In fact, some suggest that one of the causes of rising premiums in the health insurance marketplaces is because the mandate was not strong enough to incentivize healthy people to enroll.

Expand the use of Section 1332 waivers

The ACA created Section 1332 waivers. Waivers are a common tool used in the Medicaid program to override federal regulations and allow states to try different approaches to coverage and care delivery. The same principle applies here. These particular waivers allow states to apply to the Centers for Medicare and Medicaid Services (CMS) to waive specific provisions of the ACA, such as the individual and employer mandates, and change insurance design including benefits, cost sharing, and subsidies. States can use federal money set aside for the ACA to do all of this. However, the key issue here is that states need to continue to work toward the overall goals of the ACA. In doing so, the state approach must be equivalent to what would be offered through full ACA implementation. In other words, states must cover the same number of people, provide coverage that is not more expensive or less robust than plans already offered, and not increase the federal deficit.

Generally, these waivers have had bipartisan support. In theory, these waivers could allow opponents of the ACA to implement reform more in line with the principles detailed in Trump’s executive order. These waivers are available as of January 1st of this year, but states need authorizing legislation before applying for a waiver. Since 2010, legislation related to 1332 waivers was introduced in at least 17 states, and 10 of those states passed laws. The Obama Administration granted one of these waivers to Hawaii before leaving office.

Encouraging the use of Section 1332 waivers through the ACA is one way that this Administration could change the landscape of the ACA at the state level. This could be done in the interim before Congress takes action. Alternatively, this could be a tool used by the Administration to fundamentally change how the ACA is implemented at the state level without actually repealing it. Importantly, some analysts suggest that the use of Section 1332 waivers may have more practical challenges than expected, and others note that existing guidance from the Obama Administration makes them difficult to use. However, this could change with the Trump Administration. This issue of how to facilitate state innovation will be essential to Republican replacement plans moving forward.

Next steps 

We have also seen recent actions by the Administration attempting to limit outreach during the final days of open enrollment to sign up for insurance through the ACA, including canceling ads already paid for by the Obama Administration. The Administration ultimately pulled back on many of these efforts after receiving significant blowback on social media and realizing it would not actually save the government any money. You can still sign up through January 31st here. Still, these are the kinds of actions that the Administration can take unilaterally. To fully understand the reach of the executive order as well as any future executive actions, we will need to wait until the Secretary of Health and Human Services is confirmed. Early indications suggest that Representative Tom Price will likely be confirmed, with an initial vote from the Senate Finance Committee possibly taking place next week.