The president signed an executive order on October 12th, 2017 that will allow small employers to join associations of small business — such as farm bureaus or chambers of commerce — that provide health coverage to their members. If such associations self-insure, existing law might enable them to avoid both state insurance regulations and the core of the ACA.

Because less-regulated association health plans compete with fully regulated markets, actuaries and regulators have long warned that association plans create an uneven playing field that can disrupt markets.

People who don’t need to cover pre-existing conditions or don’t want to pay community rates gravitate to the better deals offered by associations, leaving sicker people in the regulated markets. Naturally, regulated insurance prices increase as a result, sometimes causing a death spiral that crashes the market.

That’s just what happened in Kentucky in the 1990s when it reformed its individual market but exempted association plans from the reforms. Enrollment with associations shot up, and most insurers selling in the regulated market pulled out. Within two years, the state repealed its reforms. Association health plans were only one part of Kentucky’s failed market reforms, but they are still a major reason why the so-called Kentucky disaster now serves as a lesson for other states to avoid similar measures.

Read the full article on health care policy by Mark Hall at Brookings