Twice on Thursday, President Trump did surprising, mean, and possibly unlawful things to destabilize Obamacare insurance markets:

1. In the afternoon, he issued an executive order that does a few things that sound good on paper (see below);
2. Later, he scrapped subsidies to health insurance companies, known as cost-sharing reduction payments, that “help pay out-of-pocket costs of low-income people.”

Taken together, these may sabotage the Affordable Care Act – “sending insurance premiums soaring and insurance companies fleeing from the health law’s online marketplaces,” according to The New York Times. The repeal of “Obamacare,” as Republicans derogatorily refer to the ACA, has been one of Trump’s primary goals since he started campaigning for office in 2015. After multiple congressional failures to do so, it looks like he’s taking matters into his own hands.

So, first: the executive order. Officially titled “Presidential Executive Order Promoting Healthcare Choice and Competition Across the United States,” the action does a few interesting things:

• It directs the Labor Department to figure out ways for small businesses to band together and purchase health insurance “through nationwide association health plans” (emphasis mine) that may “free [businesses] from several key Obamacare regulations and from state oversight, allowing them to sell plans with lower premiums but skimpier benefits”;
• It extends the time limit on short-term coverage, or “short-term limited duration insurance,” – a market that’s completely unregulated by the ACA – from three months to nearly a year;
• It looks to “broaden the ability of employers to give workers money to buy their own coverage through health reimbursement arrangements.”

These moves are all supposed to expand options, ease restrictions that keep businesses from buying insurance across state lines, and drive some costs down – they’re free-market moves, aligned with GOP orthodoxy, which was why Sen. Rand Paul (R-KY), who’s essentially a libertarian, called them “the biggest free market reform of health care in a generation.”

However: because they’ll almost certainly attract young and healthy folks looking for cheaper insurance options, they may end up sending ACA premiums soaring. Why is this? As an industry, insurance depends on cost-sharing: the more people pay into it, the cheaper it is for everybody. If healthy, employed people exit ACA markets for cheaper, unregulated markets that cover much less, then insurance companies that still participate in those ACA markets are forced to raise prices for the remaining people – the sick and the poor – to maintain the level of coverage the ACA mandates. As Dylan Scott at Vox puts it, this “has the makings of a death spiral, with ever-increasing premiums and insurers deciding to leave the market altogether.”

Trump’s second move is much more mean-spirited: by ending ACA subsidies, the White House immediately makes it extremely difficult for insurers to keep costs down for low-income folks. As Amy Goldstein and Juliet Eilperin report at The Washington Post, those cost-sharing reduction payments had gone to insurers who “help eligible consumers afford their deductibles and other out-of-pocket expenses.” Without the extra federal help, there’s not enough cash in the low-income marketplace to keep costs affordable – it’s that cost-sharing principle again. And to make matters worse, “ending the payments is grounds for any insurer to back out of its federal contract to sell health plans for 2018,” according to Goldstein and Eilperin – it’s that death spiral thing again, plus a little bit of herd mentality: with just three weeks until ACA’s open enrollment period, a move like this could spook insurers, and if just one of them pulls out of the market, it may turn into a stampede.

The administration, in making the move, argued that the cost-sharing reductions, or CSRs, were illegal – a long-running bailout of insurance companies, essentially – and in fact, House Republicans sued the Obama administration over these payments, and won, although the case immediately was appealed.

header image: the white house / flickr