What the Senate twice failed to do, the White House is now doing by fiat: President Trump today signed an executive order to undercut several key provisions of the Affordable Care Act and once again transform the nation’s health insurance markets.

The executive order is called, in full, Promoting Healthcare Choice And Competition Across The United States [PDF]. In his signing remarks, Trump said the order was, “Very very powerful for our nation” and outlined the key provisions he sought to change.

What’s changing?

The order can’t entirely repeal and replace the ACA, as the President noted in his remarks, but it can take aim at certain key provisions. The specific changes the White House seeks are to:

• Expand Association Health Plans — less-regulated group insurance plans purchased collectively by similar sorts of employers — to permit any “association” to purchase policies across state lines
• Expand short-term limited-duration insurance — plans lasting only a few months intended to bridge gaps in coverage — to last longer and be available to more buyers
• Expand tax-privileged reimbursement accounts that employers can use to reimburse workers for healthcare costs

What will the effects be?

This is where it gets complicated.

What Are Association Health Plans?
They let individuals and small employers band together to negotiate group insurance plans like the ones large employers provide for their employees.

In theory, they don’t sound like a bad idea but the non-partisan Kaiser Family Foundation notes that those plans could offer fewer benefits than plans which currently fall under regulation by the ACA. So while they would cost less, that would be because they provide less coverage, with higher deductibles and out-of-pocket costs for anyone covered under those plans.

Vox recently observed that a loophole in Tennessee law has allowed Association Health Plans to continue into the ACA era, with negative results.

The Tennessee association plan estimates that it has roughly 23,000 members enrolled in plans that are not ACA-compliant, Vox reports. Those 23,000 are, presumably, younger, healthier patients that don’t have need for extensive medical coverage at this time.

But insurance works, at a very basic and fundamental level, by pooling risk. Early insurers sold policies to a hundred ships; 99 made it back to shore safely and they only had to pay out for the one that sank. A car insurance company insures both good drivers and bad, and makes money by pocketing premiums from everyone who doesn’t need to file claims and distributing a smaller amount back to those who do.

A health insurance company theoretically works the same way: it takes in premiums from young and old, healthy and sick alike, and then only needs to pay out claims for a small percentage of its overall customer base.

But when you sell two tiers of plans, you end up splitting your pool into two tiers of customers, too. Younger customers, or those who manage to keep aging without developing a single pre-existing condition, opt for the cheaper, skimpier plans. That means that customers who are aging, and those who have ever had a disease or injury to contend with, end up having to pay significantly higher costs to obtain coverage that does what they need.

And that’s exactly what has happened in Tennessee: the state’s marketplace has some of the sickest participants in the entire country, Vox reports, and as a result also some of the highest premiums in the country.

The National Association of Insurance Commissioners — an organization representing the various state insurance regulators — has been cautious of deregulating association health plans. Each state regulates and licenses the insurance sold in its borders, and the NAIC has raised concerns that expanding association plans to allow for cross-state selling could “result in less protections for the most vulnerable populations and the collapse of individual markets across the country.”

“If the federal government pre-empts state licensure requirement out-of-state insurers would be able to lure healthy enrollees away from existing risk pools,” the NAIC told a House Judiciary subcommittee in February, “which would become progressively sicker and more expensive until they ultimately fail, leaving consumers in those states with, possibly, no carriers in their states and no in-state networks of participating providers.”

In response to today’s executive order, NAIC CEO Mike Considine expressed concern about possible expansion of association plans but noted that “nothing is written in stone yet,” since the order is just the first step in a lengthy process of rulemaking that will involve multiple agencies.

Longer Short-Term Plans
Similarly, short-term limited-duration plans are currently exempt from many ACA requirements, as Trump noted in his remarks. These plans are currently limited to a maximum of three months, and they’re meant to provide basic coverage for individuals who are otherwise between coverage — when you’ve left school but haven’t left started your job, or are between jobs, for example. They’re a stopgap.

The upshot of both policies, taken together, is that critics fear this executive order could split the insurance market into separate risk pools, leaving many Americans without coverage when they need it, and sending costs skyward for others.

Meet The New HSA: Healthcare Reimbursement
The third tentpole of the executive order has to do with expanding “Health Reimbursement Arrangements,” which seems to be the Administration’s new catch-all term for Health Savings Accounts and other similar vehicles.

MORE: WHAT ARE HEALTH SAVINGS ACCOUNTS, AND WHY ARE THEY A BIG PART OF ACA REPLACEMENT PLANS?

As we’ve explained before, HSAs are tax-advantaged accounts — the money comes out before your taxes are calculated, like 401(k) contributions.

These accounts largely exist to offset the high out-of-pocket costs individuals with high-deductible health plans face when seeking care. However, with changes that were proposed in the now-abandoned House effort to repeal and replace the ACA, these small tax shelters were poised to become bigger, better tax shelters for those who have money to squirrel away — a plan that the executive order now seeks to try to resurrect.

Is this binding? When will the law change?

The President doesn’t create regulations on private business. The best he can do is direct federal agencies to make rules, so long as they comply with existing law.

So this executive order specifically asks several cabinet agencies — the Department of Labor, the Department of the Treasury, and the Department of Health and Human Services — to themselves investigate how best to make changes to current federal regulations that would result in the White House’s desired outcome.

The various departments could, in theory, examine the directive, determine it’s unworkable, and return a consideration of “no.” That won’t happen, of course, but it is technically possible.

The Cabinet officials in question, instead, are friendly to the proposal — but making real change takes time, even for an agency that wants to move quickly. An administration official told CNN that actually crafting and enacting policy changes could take six months or more. Some complicated regulations have taken years and gone through multiple iterations before being finalized, and even then they may face legal challenges, and possibly legislative repeal efforts if the political makeup of either chamber of Congress changes significantly in the interim.

In the meantime however, the executive order may become moot if Congress manages to rally and pass some kind of repeal-and-replace legislation.

“This is only the beginning,” Trump noted at the end of his remarks. The White House has a plan to curtail more pieces of the ACA, “to take measures to provide our people with more relief and freedom,” mainly in the form of “massive tax cuts,” he said.

Trump also added, “We are going to also pressure Congress very strongly to finish the repeal and the replace of Obamacare once and for all,” concluding, “We will have great healthcare in our country.”

Is there going to be a legal challenge?

Some kind of challenge is all but guaranteed — the question is, what kind, and from whom.

Legal experts speaking with Politico considered that reinterpreting the Employee Retirement Income Security Act (ERISA) in order to expand association health plans might be a violation of that law.

“How that doesn’t get challenged, how that isn’t such an expansive interpretation of ERISA that goes beyond the administration’s authority — someone’s absolutely going to” file a challenge, one insurance industry official told Politico, adding, “This is chaos.”

The Wall Street Journal and Washington Post also both speculate that the part of the order targeting ERISA is the most likely to face legal complaints.

Pretty much every single kind of stakeholder you can think of, including the insurance companies, absolutely hated the last bill the Senate ultimately abandoned, and many groups that criticized that bill are already out with criticisms of the executive order.

“While this executive order claims to help improve consumers’ access to affordable care, it would have the exact opposite effect,” our colleague Betsy Imholz, special projects director at Consumers Union, notes in a statement.

“Allowing insurers to sell substandard association health plans that aren’t required to cover basic services and benefits will further fragment and destabilize the insurance markets as a whole,” Imholz added. “This action splits the market into two, pitting the healthy against those with preexisting conditions and life-threatening illnesses — but ultimately both groups lose in this new scheme.”

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