Why High Risk Pools (Still) Won’t Work
By Jean P. Hall
The Commonwealth Fund, February 13, 2015
As the new Congress convenes and the Supreme Court prepares to hear arguments in the King v. Burwell case challenging tax subsidies for insurance purchased through the federally facilitated marketplaces, proposals to repeal and replace the Affordable Care Act (ACA) are resurfacing. Many of these rely on high-risk health insurance pools to cover people with preexisting health conditions.
In fact, the risk pools are suggested as a viable alternative to the ACA’s ban on preexisting condition exclusions in the individual market and the marketplaces. My recent analysis of high-risk pools, however, explains why these entities simply are not a realistic alternative to coverage requirements under the ACA. In a nutshell, high-risk pools:
- are prohibitively expensive to administer,
- are prohibitively expensive for consumers to purchase, and
- offer much less than optimal coverage, often with annual and lifetime limits, coverage gaps, and very high premiums and deductibles.
Recent proposals to replace ACA reforms with high-risk pools focus on using state-based programs, but historical experience with 35 state-based high-risk pools and more recent experience with the national Pre-Existing Condition Insurance Plan (PCIP) illustrate the problems with this approach. Even though state-based high-risk pools charged premiums of up to 250 percent of those charged to healthy beneficiaries in the individual insurance market, premium revenues paid just 53 percent, on average, of program costs. In addition to these high premiums, enrollees in state-based high-risk pools faced annual deductibles as high as $25,000 and annual coverage limits as low as $75,000. Past research indicated that high costs and limited benefits associated with high-risk pool coverage resulted in delayed or forgone care and adverse outcomes for enrollees. Many also accrued medical debt despite having insurance.
For these reasons, use of high-risk pools in lieu of marketplace and Medicaid expansion coverage would result in greater state and federal costs, fewer people with preexisting conditions able to obtain coverage, and coverage that fails to meet the often greater needs of people with chronic conditions.
Brief: Why a National High-Risk Insurance Pool Is Not a Workable Alternative to the Marketplace
By Don McCanne, MD
Those who wish to repeal or at least drastically reduce the provisions of the Affordable Care Act realize that they must come up with a replacement.
Most of the proposals would grant much greater flexibility to insurance products while reducing regulatory oversight. The problem that creates is that individuals with high medical expenses tend to be shut out of the insurance market. To ensure coverage for these individuals, high-risk insurance pools have been proposed.
This article and the brief that it is based on explain why high-risk pools are not a satisfactory solution. The premiums are unaffordable, and the pared-down benefits are unsatisfactory. These over-priced plans do not provide the financial protection that patients with chronic disorders need.
Even with the Affordable Care Act, enrollment in the temporary high-risk pools had to be closed early because they proved to be too expensive, threatening depletion of the allotted funds. They provide poor coverage at a very high cost.
With a single payer system this problem disappears. Funding is based on ability to pay, through the tax system, and not on the basis of anticipated medical expenses. Everyone receives the care they need, regardless of their health status. The fragmented plans supported by the repeal and replace people cannot do that.