President Trump is expected to issue an executive order during the next few weeks that would allow people to buy health insurance across state lines, but the arrangement looks different from the idea conservatives have described in the past, and critics fear it could further destabilize the Obamacare exchanges and offer inadequate protections for customers.
Interstate insurance sales have long been championed by conservatives as a way to lower costs and stir greater competition in the national marketplace. When policymakers discuss it, they typically describe individuals buying coverage from an insurance carrier in another state, directly through a broker or an Obamacare exchange.
But the proposal by Sen. Rand Paul, R-Ky., that Trump is examining would operate differently. Instead of allowing individuals to buy a health plan in another state, it would allow more people to band together as a group to do so.
"If these individuals can join large groups across state lines, I think they'll get protection, less expensive insurance, and it'll be able to solve a lot of the problems we have in the individual market," Paul said on MSNBC.
His proposal is for the Trump administration to make regulatory changes to the Employee Retirement Income Security Act, known as ERISA. The law allows large businesses to buy insurance across state lines because they have workers in several states. Under Paul's proposal, an individual or a handful of people could join an association health plan and they would be considered one large employer for the purpose of providing coverage.
Association health plans used to be more common before Obamacare, which placed restrictions on their use. Paul hopes that Trump can loosen some of these restrictions through the Department of Labor, one of Paul's senior healthcare aides said.
Department of Labor officials declined to comment because the agency has not seen an executive order.
The administration hasn't shared with Paul's office which regulations would be changed, but Paul's position is that individuals who are self-employed should be allowed to join the plans. The requirements currently stipulate that the associations have to have a degree of control over their members, meaning in the day-to-day decisions like hiring and firing people.
He would also like to see different industries be allowed to band together.
"The Department of Labor has required that associations have a strict commonality, so they have to be in the same industry," Paul's aide said. "This prevents the Chamber of Commerce or the [National Federation of Independent Business] from banding together."
Allowing sales across state lines means that an insurer would sell coverage out of the least-restrictive state.
"What you will end up with is all the associations will be organized out of a state which has set its regulations at the lowest possible level," said G. Lawrence Atkins, executive director of the Long-Term Quality Alliance who formerly worked as a staffer for Republicans.
Under Obamacare, interstate sale of insurance is permitted but is not considered particularly worthwhile because plans across the nation must have a specific set of requirements that cause higher prices. They must guarantee coverage to people with pre-existing illnesses without charging them more. They also have to provide coverage for a range of medical care, from addiction to maternity services.
Those stipulations, however, do not apply to association health plans, meaning they can offer less expensive health insurance, with less coverage.
"Because there isn't a lot of regulation, if you are allowed to come in as an individual or as part of a small group, and the association can rate each new entrant separately, then they can select the best risk," Atkins said. "They can raise rates for those who have come in with a lot of risk."
The National Association of Insurance Commissioners opposes the plans, saying in a letter to lawmakers at the beginning of this year that the plans would pre-empt state authority and erode consumer protections.
Kevin Lucia, project director at Georgetown University's Health Policy Institute, said an executive order that allows for the associations potentially would undermine the stability of the state-regulated individual and small group markets, leading to fewer plan options, higher premiums and overall loss of consumer protections.
"For an insurance market to work effectively for the benefit of all consumers, health insurance companies need to operate by the same set of rules," he said. "At the end of the day, if the administration moves forward with allowing these arrangements to be more loosely regulated and allowed them to bypass critical consumer protections, it sets up an uneven playing field that ultimately destabilizes the individual and small group market and puts consumers at risk."
The result of the executive order, he said, would be that healthier people would enter an association but sicker customers would stay behind in the Obamacare exchange. When people need more robust coverage, they would join the Obamacare plans. That would mean the cost of health insurance would become more expensive each year and the federal government would pay more to subsidize premiums.
"If the administration moves forward with allowing an association arrangement that is exempt from state laws, then it's basically federal takeover of health insurance," Lucia said. "It's allowing consumers to go into plans that do not meet state consumer protections, solvency standards and other critical areas of insurance oversight."
But to Paul and other conservatives, allowing people to buy these types of plans, which would be less expensive, is a worthwhile goal. Several Republicans pushed for plans to be allowed to offer less generous coverage during Congress' efforts to repeal and replace Obamacare. The House this year passed the Small Business Health Fairness Act, which would allow small employers to band together and buy health insurance through federally certified associations.
"There are experts who have advocated for this change for years, and the fact is it allows more access to a wider variety of plans, with the protections of being in a large group, to millions more Americans," said Doug Stafford, chief strategist for Paul's political action committee. "That's something we should all be for, and indeed it has bipartisan support in Congress."
The administration is looking at the options it can provide for customers who don't receive subsidies under Obamacare, who are facing premium increases and fewer choices. The types of people who have stayed in the exchanges under Obamacare are already disproportionately sicker and more expensive, partly because of decisions made under the Obama administration that allowed people to keep cheaper plans that didn't meet the law's requirements and lack of enforcement of the individual mandate. Young, healthier enrollees have eschewed the plans.
"When people can select against the pool, then the pool costs go way up and that's what's happening now," Atkins said. "Generally this climate right now is going to make these worse even without intention."
White House spokesman Ninio Fetalvo said Trump wanted to provide relief for those facing expensive coverage.
"The Senate has thus far failed to repeal and replace this disastrous law," Fetalvo said in an email to the Washington Examiner. "The president and his administration are considering several actions to provide flexibility and relief to the many Americans who continue to suffer under Obamacare."
• Gabby Morrongiello contributed to this report.