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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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Fighting Our Healthcare Woes – A Bipartisan Consensus is Needed

In a predominately two-party political system, finding common ground through compromise has been the hallmark approach on making our nation successful, especially when confronted with wars, national tragedies and economic crisis. That is the beauty about our country, we find ways to come together and resolve our differences – at least until the crisis has been conquered or averted.

A few years ago, I remember sitting in a roundtable meeting with other business executives discussing a particular topic about a local company. The situation consisted of a management team, currently at odds with one another, having difficulties coming together to resolve their differences. At the time, the relationships within the team were toxic, and it appeared this ‘cancer’ was rapidly spreading throughout the organization – beyond the team members. Needless to say, the repercussions were not good for the company, its employees or its clients. How could this situation be quickly remedied? There appeared to be no simple answers.

Except one.

A roundtable member somewhat comically blurted out, “What this company needs to do is invent an old-fashioned crisis!” Instinctively, chuckles from other members ensued, including my own bewildered display of astonishment. But after a few minutes of exchanging amusing remedies to serve as a concocted crisis, the roundtable group began to seriously consider the innate truth within that seemingly preposterous comment – a crisis just might be the cure for this organization to pull together.

Healthcare is an Economic Crisis

It is now time to treat our healthcare woes as a ‘crisis,’ an immediate threat to the livelihood of all Americans – regardless of race, age, gender, and yes, party affiliation. Oh sure, in the past, we have heard our elected officials ‘label’ this problem as a crisis. But labeling is quite different than ‘treating’ it as a major threat to our long-term national well-being. Over time, unfettered healthcare costs have become the outside intruder (or invader) that can single-handedly change our lives with dire consequences, not only for our generation, but for generations that follow. Unlike the roundtable crisis discussed, this crisis does not need to be invented because it is REAL.

Let’s give our healthcare crisis some due respect. It is a uniquely American problem that requires solutions from both parties – not just one. As Republican Gov. John Kasich recently stated on ‘Meet The Press‘, “When you jam something through, just one party over another, it’s not sustainable…We’re talking about lives…We better be careful we’re not losing the soul of our country because we’re playing politics.”

As Republicans take their turn to overhaul almost one-fifth of the U.S. economy for the sake of ‘delivering on their campaign promises,’ they would be well-served – as would all Americans – to find common ground with Democrats. It’s time to break the cycle of each party assuming their approach is the only approach. To date, neither party has proven it has cornered the market of demonstrating brilliance on any given subject. It is extremely dangerous to assume that one party can unilaterally fix an extremely complex problem. Republicans cannot, nor can Democrats. Together, however, we have a fighting chance for a more favorable outcome.

One quote that I often use comes to mind here. Vaclav Havel, a Czechoslovakia writer, philosopher, political dissident and former president of Czechoslovakia, once wrote: “Keep the company of those who seek the truth – run from those who have found it.”

With our current healthcare crisis, we can always use more seekers than those who pretend to have all the answers. It is now time to find common ground.

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Comparing Two Iowa Counties on Health Insurance Tax Credits

Once again, another attempt is being made by the other major political party to fix what ails our national healthcare ‘system.’ But this newest attempt by House Republicans, the American Health Care Act (AHCA), has already been met with opposition by major stakeholders, such as the American Medical Association, American Hospital Association, the insurance industry, in addition to Democrats and uber-conservative Republicans.

Despite the flurry of headlines, summaries, analysis and opinions about what this bill does and does not do, the Congressional Budget Office (CBO) has scored that the cost of this bill would reduce the federal deficit by $337 billion through 2026, however, it would leave 14 million people without insurance in 2018 compared with the ACA.  The CBO just released its’ findings.

To ensure coverage, the Affordable Care Act (ACA) currently subsidizes insurance premiums based on age and income. The ACA also attempts to factor the local cost of insurance into its subsidy. In addition, for those making less than 250% of poverty, cost-sharing assistance is provided to lower the deductibles and copayments for those enrolled in eligible marketplaces. The AHCA, on the other hand, provides tax credits based on age only, and this phases out for individuals with incomes above $75,000.

For any healthcare reform plan to work, there must be a large incentive for young and healthy people to seek coverage to help equalize (or subsidize) the unhealthy population. This is largely known as Health Insurance 101 – mitigating adverse selection risks.

I took great interest in an interactive map (at the county-level) provided by the Kaiser Family Foundation that compares estimated premium tax credits consumers would receive under the ACA in 2020 compared to what they would receive under the AHCA released by House Republican leaders on March 6. The interactive map does not factor in the cost-sharing assistance offered through the ACA, only the premium subsidy (ACA) and tax credits (AHCA).

I wanted to learn just how different subsidies and tax credits were between the ACA and AHCA, based on age and income, comparing a metropolitan county (Polk) to a rural county that I grew up (Appanoose). The results are quite staggering.

As a 27-year-old earning $20,000 and living in Polk county in 2020, the ACA is estimated to provide a $2,360 subsidy while the AHCA would provide a $2,000 tax credit. Living at this same age (and income) in Appanoose county, the ACA would provide an even greater subsidy of $4,440 vs. $2,000 (AHCA). At this younger age, and presumably healthy, this individual would have a greater incentive to seek insurance coverage through the marketplace under the ACA compared to the new version that would replace it. We don’t know if the replacement plan will generate lower-premium health plans for the public to purchase – this is pure speculation at this point.

Below are summaries of how people compare based on age, income and location (Polk and Appanoose counties). The subsidies and tax credits in red indicate that this amount is less than the opposing plan at that same age (ACA or AHCA). Generally speaking, the comparisons suggest that older people with lower-income (and live in higher-premium areas) receive larger tax credits under the ACA than they would under the AHCA replacement plan. This first chart is for those who earn $20,000, $30,000 and $40,000 annually.

This next chart compares people who earn $50,000, $75,000 and $100,000.

As I have written numerous times in the past, this second attempt to fix healthcare will be meaningless unless we focus on the true drivers of cost, which includes waste, lack of transparency and the exceedingly poor health of our population.

With that said, what are we really trying to solve?

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