High Risk Pools, A Better Way?

After reading a variety of news sources that predicted what might be next in healthcare for 2017, I decided to take a further dive into the specifics of the Republican healthcare proposals (RHCP). The next step in healthcare will likely include parts from Paul Ryan's "A Patients' Choice Act,"  Tom Price's "Empowering Patients First," the healthcare portion of the Republican's plan "A Better Way," and statements from President Trump. 

One popular component of these plans is high-risk pools (HRPs). In this summary, I try to examine what it might mean for patients and the future state of healthcare.

Regarding High-Risk Pools
Prior to the Affordable Care Act (ACA), insurance policies sold on the individual market were medically underwritten. That means health insurance companies evaluated individuals' health status, health history and other risk factors such as pre-existing conditions, to determine price and coverage for policies. For example, a person with high blood pressure (HBP) on medication could purchase insurance on the individual market. However, the insurance would not cover conditions related to any illness that continued or developed from high blood pressure, since it was a pre-existing condition. 

Since the ACA took effect in 2014, health insurers have been prevented from denying medical coverage or charging unfairly high premiums to people with pre-existing health conditions. The effect has been that insurers are leaving the exchange markets and complaining that sicker people are buying plans and healthier people are not. This leaves insurers with the burden of not enough revenue to cover health costs. Specifically, an estimated 19 million "young invincibles" have not signed up for health insurance. 

To remedy the problems of insurers leaving the exchange market, stabilized insurance prices and increased access to affordable insurance for individuals and families, some conservatives and Republicans want to fund high risk pools. Their proposals include taking the sickest people out of the commercial market and putting them into "separate, tax-subsidized, high-risk plans." On the other hand, Dean Clancy, a former senior health policy advisor to congressional Republicans and the George W. Bush administration, called high-risk pools "targeted welfare."  There are definitely mixed feelings on the matter by many people.

For insurers and healthy people, the HRPs seem like a reasonable approach to stabilize health insurance prices. What is the cost? If the HRPs are not adequately funded and do not provide the health care that patients need, it will result in sicker people becoming even sicker, higher utilization of emergency rooms, health disparities and tax payers consistently footing an ever increasing healthcare bill. The Ryan plan proposes federal funding of $25 billion over 10 year while  Price's plan proposes $1 billion over 3 years. 

Viability is a huge question regarding high risk pools. We have some historical data because some states have had or still have HRPs. A December 2014 Commonwealth Fund study concluded that the pools are:

• Prohibitively expensive to administer
• Coverage is too expensive
• Benefits are not adequate 
  

The Kaiser Family Foundation (KFF), in a study of pre-existing conditions that were medically underwritten in the individual market before the ACA lists at least 30 conditions. They include the following: HIV, Diabetes mellitus, hemophilia, hepatitis C, obesity, pending surgery or hospitalization, pregnancy and transsexualism. These conditions are extremely high cost and a number of factors can even further increase these high costs related to these conditions. It does not seem likely that states and the federal government will fund these plans to cover all of the medical treatment related to these conditions. I am making a bit of an assumption, as I look at the 19 states that rejected federal aid to expand Medicaid. I would conclude that rejected funding for medical care for the most vulnerable populations including access to basic primary care and preventative care, the funding allocated to high-risk pools will not be enough to cover those most in need.

In addition to the above, a small number of states limited enrollment in high-risk pools to control costs to the states. Even with limited enrollment, in 2011  net losses for 35 state high-risk pools were over $1.2 billion, or $5,510 per enrollee, on average. States financed these pools by revenue sources such as tobacco taxes and hospital assessments. Paul Ryan has proposed guaranteeing universal access to healthcare, but it's unclear how the government will pay for these high-risk pools. Health savings accounts (HSAs) have been part of the solution, but for high-risk pools with HSAs are not going to be nearly enough to help individuals and families cover medical expenses. 

To conclude, although we have historical data on what has happened with high-risk pools, some successful and some not so successful. Without knowing exactly who will make up these pools, how the pools will be funded and where the money will come from, I am not very optimistic about saying this option is better than a "Medicare for all" which insures everyone and spreads the risk in a practical way. As of December 2016, Republicans have not been clear on which of the current ACA tax/revenue streams they will repeal or keep.

In a subsequent posting, I intend to continue discussion on this topic.