My comments, as usual, will be in red.
GOP Pushes ‘High-Risk’ Pool In ACA Replacement
Minnesota Public Radio (MN)
For many Republicans looking to scrap the Affordable Care Act, the fix will come from separating people into two pools.
The lower-cost one would be for healthy people. Those with expensive medical conditions that drive up health spending would be sorted into the more expensive "high-risk" pool.
Interesting but how do you do that without medical underwriting? Guaranteed issue ensures that the market is a financially bankrupt "take all comers" free-for-all.
The goal is to hold down skyrocketing premiums for people who buy non-group insurance, but experts say high risk pools create their own problems.
Yes but only one of them is making the system collapse under its own weight, utilization costs.
Returning to them sounds simple, but the economics are terrible, said Karen Pollitz, a researcher with the nonpartisan Kaiser Family Foundation.
"The sickest 5 percent of people account for half of all health care spending in the entire population," she said, "so it is an expensive undertaking to segregate out people when they're sick and find another way to pay for their care."
That may be true and as long as risk management and actuarial science are not used in the creation of rate structures, these pools will do little to remedy this problem.
Obamacare bans state high-risk pools, including the old Minnesota Comprehensive Health Association, or MCHA.
These government-sponsored programs sold health insurance to people other health plans refused to cover. That kept high-cost people out of the general insurance market and helped hold down premiums.
It may have held down premiums in one segment of the market but it didn't reduce utilization costs and therein lies the problem.
Supporters tout a return to that approach as a smart way to bring down premiums.
"Minnesota had one of the best insurance pools, high-risk insurance pools in the country and it was undone by the ACA," Minnesota GOP Rep. Jason Lewis said on CNN.
But the premiums don't go down for everyone.
Craig Britton of Plymouth was forced to buy MCHA coverage because of a pancreatitis diagnosis.
He paid more than $18,000 a year in premiums.
Depending on the plan, $1500 is pretty standard industry wide. I'm not saying that is good or bad but if you have high utilization costs, it only bears you pay more.
"That is catastrophic cost," he said. "You have to have a good living just to pay for insurance."
There's no disputing high-risk pool insurance is expensive, Minnesota state health economist Stefan Gildemeister said.
"It's not cheap coverage to the individual, and it's not cheap coverage to the system," he said.
That's because you have no idea the correct amount of premium you should be charging.
MCHA priced premiums for policy holders at 25 percent more than conventional coverage.
That meant some people who needed the coverage couldn't afford it, Gildemeister said. "There were people out there who had a chronic disease or had a pre-existing condition who couldn't get a policy."
Gildemeister said even the higher premiums fell far short of covering the full cost of the insurance for the roughly 25,000 people on MCHA. The program needed more than $173 million in subsidies in its final year of normal operation.
Of course they fell short because you had no idea what your risk exposure was because of the guaranteed issue component. That never goes away as long as you ask no questions during the application process.
The money came from fees on commercial insurance plans.
Gildemeister ran the numbers for a return to MCHA. Annual high-risk pool coverage for a 40-year-old would cost more than $15,000. The policy holder would pay about $6,000. The state would have to find more than $9,000 in subsidies.
$450 a month to the member for guaranteed issue insurance is insanely cheap. I can't find any private non-subsidized coverage like that in Jersey even for the youngest and healthiest of our population. This is what I mean by using risk management to assess risk and formulate a proper rate of premium. At that rate, one in patient visit eats up all of that premium and even with a negotiated rate for services rendered, they are still awash in red ink.
A national plan offered by Republican House Speaker Paul Ryan would fund high-risk pools with at least $25 billion over a decade. The nonpartisan Commonwealth Fund estimates it could cost much more than that - almost $180 billion per year.
I too believe it will be closer to $180 billion due to utilization costs tacked on to any subsidy program.
University of Minnesota health policy professor Lynn Blewett said there is a better alternative than a return to high-risk pools.
It's called "reinsurance," and provides health plans with a financial buffer should they get nailed with higher than expected costs.
Researchers at the global consulting firm McKinsey & Co. say a reinsurance program would be much less expensive than high-risk pools. They estimate reinsurance would stabilize premiums for about a third the cost of restoring high-risk pools.
What secondary RE company is going to take this risk on? There are no ways to assess risk, no ways to mitigate or reduce exposure through utilization and no built in stop gaps to prevent catastrophic loss to the carrier. No smart reinsurance carrier will ever take this action.
The big question, Blewett said, is whether lawmakers will balk at the cost of stabilizing premiums, whatever the approach.
"The rub is where that funding is going to come from," she said, "and is the federal government or the state government willing, you know, to put up the funding needed to make some of these fixes?"
Government doesn't have to be the solution here especially when they caused the problem to begin with. Read my blog and see the post "Sensible Solutions To The Affordable Care Act".
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