President Donald Trump signed an executive order Thursday that he hopes leads to lower health insurance premiums, but Maryland’s top insurance regulator is questioning whether the order would work in this state.
The thrust of Trump’s order instructs the Department of Health and Human Services to look into ways to increase competition, primarily by allowing the formation of health associations to buy insurance.
“We aim to allow more small businesses to form associations to buy affordable and competitive health insurance,” he said. “This would open up additional options for employers to purchase the health plans their workers want.”
The idea of these types of plans would be to bring more healthy people into the market by lowering premiums and offering plans, similar to what large employers offer, by banding together small businesses.
Under Maryland law, these associations would have to be registered with and approved by the Maryland Insurance Commissioner. They must also file and have their rates approved by the commissioner.
The state’s current commissioner, Al Redmer, questioned the effectiveness of these associated health plans, saying they tend to fragment the risk pool rather than broaden it.
“Insurance 101 is that we want as many people in the insurance pool as possible to spread the risk,” he said. But the association pools tend to be smaller than the general overall pools.
“You are fragmenting the market and making the pools smaller,” he said. “With that, how is it better to buy insurance through an association?”
Trump also has directed Secretary of Labor Alex Acosta to look into whether association plans could be sold across state lines.
“This will create tremendous competition and transformative — in so many ways — change aimed at creating more and lower prices for millions of Americans,” Trump said. “Insurance companies will be fighting to get every single person signed up, and you will be hopefully negotiating, negotiating, negotiating, and you’ll get such low prices for such great care.”
Insurers already sell policies in multiple states. But selling the same insurance policies across state lines is another area in which Redmer expressed doubts.
Using the hypothetical example of an insurance company in rural Nebraska selling policies in Maryland, he pointed to several areas of concern. Primarily, citizens in Maryland would have problems finding a health care provider. This insurer would not have relationships with existing providers in Maryland and hospitals like Johns Hopkins and the University of Maryland Medical System would throw off that insurer’s pricing plans.
“Health care is local,” Redmer said. “You’re accessing it for the most part through your local community. How does it work if you finance it through a carrier on the other side of the country?”
A third element of Trump’s executive order could expand the types of policies offered through short-term insurance. Currently, those policies can only last three months under the Affordable Care Act.
These policies typically cover people between jobs and those who missed the open enrollment period, the White House said. Redmer believes this could be a positive change for the insurance market, if the states are allowed to regulate the policies.
“I think that will go toward solving some of the needs that some folks have in the marketplace,” he said. “I think that’s a good thing, but I haven’t seen the details yet.”