Repealing the Affordable Care Act Through Executive Action: The Case of Essential Health Benefits

As Congress ramps up its effort to repeal the Affordable Care Act (ACA), the Trump administration is expected to launch a separate drive to downsize the law through executive action. As with all complex statutes, the ACA vests considerable powers in the executive branch to interpret, implement, and enforce its provisions.¹ Because procedural considerations prevent Congress from immediately repealing the law in its entirety, of special interest will be those aspects of the law—most notably its sweeping federal reforms of the health insurance market—that lie beyond the reach of early legislative action because they do not directly implicate federal revenues or outlays. Major laws typically are drafted in broad strokes. As a result, regulatory actions offer a power tool by which administrations can place their own legal gloss on the meaning of statutes, in ways that can either advance or undermine them.

At the same time, however, a president’s powers are circumscribed by basic principles of administrative law that apply to the executive branch of government generally. Their purpose is to prevent rapid, unfounded reinterpretations of legislative policies in order to advance changing political circumstances and preferences. The same procedures that apply to the creation of new rules (notice, public comment, and obligation on the part of an agency to give a reasoned basis for proposed and final changes) also govern efforts to fundamentally alter or repeal regulations that have become final. This is not to say, of course, that a determined administration cannot accomplish a great deal through regulatory powers. But the process for doing so can be long and is governed by basic principles of transparency and due process.

One of the most important ACA elements is the essential health benefits (EHB) provision.² Part of the ACA’s market reforms, the EHB statute is intended to ensure that health insurance policies sold in the individual and small group markets provide a reasonable level of protection against high costs while also covering preventive and primary care. Modeled on a “typical” employer plan, the provision contains two principal elements, as well as certain other requirements barring discrimination based on age or disability and ensuring minimum protections for emergency care. First, the law specifies 10 categories of services that must be covered at least to some degree: ambulatory patient care; emergency care; hospitalization; maternity and newborn care; mental health and substance abuse services, including treatment of behavioral health conditions; prescription drugs; rehabilitative and habilitative treatment; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care. Most of these services would be covered to one degree or another in a typical employer plan.

Second, the EHB statute focuses on the actuarial value of the package; that is, the percentage of premium dollars that goes to payments for covered services. Under the ACA, the minimum acceptable actuarial value for EHB-governed health plans begins at 60 percent; a plan with this value would typically have the lowest premiums and highest cost sharing. At the upper bound is a plan with a 90 percent actuarial value, offering higher premiums and lower cost sharing. The average actuarial value of marketplace plans is 70 percent, while that for a typical employer plan is around 80 percent.³

In combination with other ACA reforms, most notably its prohibition on annual and lifetime coverage limits, the EHB statute is intended to reasonably protect people against the high cost of illness while also offering a range of preventive and primary care coverage. The Congressional Budget Office has clarified⁴ that when estimating coverage among the nonelderly population, it does not count as insured people whose insurance policies are so limited—such as flat dollar limits on certain treatments or coverage only for certain conditions—that protection is seriously inadequate.

Implementing regulations issued by the Obama Administration⁵ place a relatively modest administrative gloss onto these statutory requirements. Rather than detailing minimum federal requirements, the regulations by and large defer to states, which have sweeping powers under law to regulate the insurance market. Within a broad federal framework, each state uses its own powers to define what it considers a “typical” employer plan, referencing plans actually sold in its insurance market. Only at certain discrete points does the federal government intervene. For example, the Department of Health and Human Services has defined preventive services to include all US Food and Drug Administration-approved contraceptive methods. Similarly, the agency has established basic requirements governing coverage of pediatric oral and vision care. Furthermore, because habilitative services are not commonly found in state-regulated employer plans, federal rules establish minimum coverage standards to protect children and adults who have disabilities that prevent normal functioning. The rules also specify certain design elements for drug formularies, chiefly to ensure reasonableness, prevent insurers from applying coverage tiers that disadvantage patients with certain disabling conditions such as HIV/AIDS, and ensure expedited coverage determinations for off-formulary drugs. In short, the EHB rule exemplifies use of federal regulatory powers to steer with a relatively light hand, building in considerable deference to both insurers and states to define and apply the terms of the law.

What could the Trump administration do, in the name of rolling back burdensome federal regulation (always a favorite battle cry) to undermine these minimum safeguards? The short answer is a lot. The administration could eliminate the minimum standards for habilitative, pediatric, and prescription drug coverage. The administration also could cease conducting oversight activities of health plans sold in the federal health insurance marketplace. And, in a move that is widely anticipated and that would affect not only the EHB-governed market but the plans provided by larger employers as well, the administration could water down the preventive coverage rule entirely or simply wipe out its contraceptive coverage standards, which exist only in regulation and not in statute.

What are the prospects for success of such a strategy? Writing new rules is a major undertaking, but the administration certainly could propose to modify or entirely eliminate the EHB coverage rule and its related preventive coverage rule. Officials would have to justify their decision to strip away even the minimum protections found in today’s regulations, and the public would be entitled to the opportunity to submit comments. Any final rule would have to be able to withstand legal scrutiny as a rational shift in policy.

How might the administration justify repealing standards designed to bring basic scope and fairness to coverage? An always-handy rationale consists of three related claims: (1) insurers are in the best position to make choices regarding coverage design; (2) states can regulate insurers if they choose; and (3) federal standards are redundant and unnecessary. We have seen this tired movie many times before. More importantly, the EHB rules, modest as they are, respond to real, documented examples of insurer unfairness and an absence of state regulation. Whether this agency flimflam will work this time or fall under legal challenges remains to be seen. But where the ACA is concerned, those who care about fairness and equity should gird for a two-front war.

References

1. Scanlon MF, Page KS, Rothenstein CL, and Santo CT. Presidential and Congressional Authority to Roll Back Executive Actions. December 1, 2016. The National Law Review. http://www.natlawreview.com/article/presidential-and-congressional-authority-to-roll-back-executive-actions. Accessed January 17, 2016.
2. Patient Protection and Affordable Care Act, 42 USC § 1302 (2010).
3. Gabel J, Whitmore H, Green M, et al; The Commonwealth Fund. Consumer cost-sharing in marketplace vs. employer health insurance plans, 2015. http://www.commonwealthfund.org/publications/issue-briefs/2015/dec/cost-sharing-marketplace-employer-plans. Published December 21, 2015. Accessed January 17, 2017.
4. Maeda J, Beyer SY. How does CBO define and estimate health insurance coverage for people under age 65? Congressional Budget Office blog. https://www.cbo.gov/publication/52352#1. Published December 20, 2016. Accessed January 17, 2017.
5. Essential Health Benefits Package, 45 CFR §156.100-156.155.

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