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Diving into the High-Risk Pool

R-I-S-K is a four-letter word that we experience in our daily lives with nearly every decision we make – whether it be driving a vehicle, eating unhealthy food, using tobacco products or boarding an airplane. Often, we don’t even think of these activities as being linked to safety or well-being risks.

High-Risk Pools

One key element to repealing and replacing the Affordable Care Act (ACA) is also related to risk – covering people with pre-existing medical conditions. In the days, weeks and months ahead, chances are you will be learning more about high-risk pools and how they can help mitigate the impact of high-need, high-cost individuals enrolled in the non-group health insurance market. High-risk pools are typically created by state legislatures with regulatory oversight by state insurance departments. They provide a safety net for the “medically uninsurable” population who have been denied health insurance coverage due to a pre-existing health condition.

The recently-passed Republican House bill known as the American Health Care Act (AHCA), was designed to dismantle the Affordable Care Act (ACA) and shift power to states to set important health insurance rules. One contentious provision of the bill allows for states to obtain a waiver to let insurers return to their pre-ACA practice of charging more to customers with pre-existing medical problems.

It is important to note that population healthcare is highly concentrated. In the U.S., the healthiest 50 percent of the population accounts for less than three percent of total health costs, while the sickest 10 percent account for about two-thirds of population health spending.

In December 2016, the Kaiser Family Foundation estimated that 27 percent of adult Americans under age 65 have health problems that would likely make them uninsurable in an individual market lacking the ACA’s protection. Many of these individuals have access to employer-sponsored plans (or Medicaid) that provide protection to pre-existing conditions. However, for those who don’t have access to these plans, finding coverage at an affordable cost is similar to finding a unicorn in a reputable zoo.

Avalere recently projected that 2.2 million enrollees in the individual market today have some form of pre-existing condition. The AHCA allocated $23 billion ($15 billion over nine years and $8 billion over five years) to assist individuals with pre-existing conditions through high-risk pools. Avalere projects this amount will only cover about 110,000 individuals with pre-existing conditions, about five percent of those eligible.

The AHCA created another $100 billion over the next nine years, beginning in 2019, for the Patient and State Stability Fund – a program designed to provide flexibility to states to ensure stability within the insurance markets. This amount attempts to entice insurance plans to participate and offer lower premiums. However, according to Avalere, if this money was allocated to exclusively cover individuals with pre-existing conditions, only 600,000 individuals would be covered (27 percent of the 2.2 million enrollees with health problems). Most high-risk pools around the country have historically suffered financial hardships because the funding is often insufficient or poorly operated.

Before the ACA became law in 2010, high-risk pools existed in 35 states, and enrollees paid 150% to 200% above the standard non-group premiums. Additionally, according to Kaiser, 33 states with these pools included lifetime limits that capped the exposure of insurance carriers, with most limits in the $1 million to $2 million range. To ensure financial ‘integrity,’ many states also imposed waiting periods in these programs before insurance would cover medical claims considered to be pre-existing.

The Republicans in the U.S. Senate are now center-stage in this healthcare reform spectacle, making preparations to craft their own solution to repeal, replace or repair the ACA. They, too, will need to confront the high-risk component that is inherent in the insurance market. With this high-risk issue, will we find the high-reward results desired by many?

This discussion will continue to play out in the next weeks and months ahead…

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