Drowning In A 'High-Risk' Insurance Pool, At $18,000 A Year

Feb 18, 2017
Originally published on March 3, 2017 3:00 pm

Some Republicans looking to scrap the Affordable Care Act say monthly health insurance premiums need to be lower for the individuals who have to buy insurance on their own. One way to do that, GOP leaders say, would be to return to the use of what are called high-risk insurance pools.

But critics say even some of the most successful high-risk pools that operated before the advent of Obamacare were very expensive for patients enrolled in the plans, and for the people who subsidized them — which included state taxpayers and people with employer-based health insurance.

The argument in favor of high-risk pools goes like this: Separate the healthy people, who don't cost very much to insure, from people who have pre-existing medical conditions, such as a past serious illness or a chronic condition. Under GOP proposals, this second group, which insurers fear might be expected to use more medical care, would be encouraged to buy health insurance through high-risk insurance pools that are subsidized by states and the federal government.

Republican Speaker of the House Paul Ryan made the case for high-risk pools on public television's Charlie Rose show in January.

"By having taxpayers, I think, step up and focus on, through risk pools, subsidizing care for people with catastrophic illnesses, those losses don't have to be covered by everybody else [buying insurance], and we stabilize their plans," Ryan told the TV host.

Minnesota's newest congressman Jason Lewis (R-Minnesota) recently endorsed high-risk pools on CNN.

"Minnesota had one of the best ... high-risk insurance pools in the country," Lewis said. "And it was undone by the ACA."

It's true that the Affordable Care Act banned states' use of high-risk pools, including the Minnesota Comprehensive Health Association, or MCHA. But that's because the MCHA was no longer needed, the association's website explains; the federal health law requires insurers to sell health plans to everybody, regardless of their health status.

Supporters of the MCHA approach tout a return to it as a smart way to bring down the cost of monthly premiums. But MCHA had detractors, too.

Craig Britton of Plymouth, Minn., once had a plan through the state's high-risk pool. It cost him $18,000 a year in premiums.

Britton was forced to buy the expensive MCHA coverage because of a pancreatitis diagnosis. He calls the idea that high-risk pools are good for consumers "a lot of baloney."

"That is catastrophic cost," Britton says. "You have to have a good living just to pay for insurance."

And that's the problem with high-risk pools, says Stefan Gildemeister, an economist with Minnesota's health department.

"It's not cheap coverage to the individual, and it's not cheap coverage to the system," Gildemeister says.

MCHA's monthly premiums cost policy holders 25 percent more than conventional coverage, Gildemeister points out, and that left many people uninsured in Minnesota.

"There were people out there who had a chronic disease or had a pre-existing condition who couldn't get a policy," Gildemeister says.

And for the MCHA, even the higher premiums fell far short of covering the full cost of care for the roughly 25,000 people who were insured by the program. It needed more than $173 million in subsidies in its final year of normal operation.

That money came from fees collected from private insurance plans –- which essentially shifted a big chunk of the cost of insuring people in MCHA program to people who get their health insurance through work.

Gildemeister ran the numbers on what a return to MCHA would cost. Annual high-risk pool coverage for a 40-year-old would cost more than $15,000, he says. The policy holder would pay about $6,000 of that, and subsidies would cover the more than $9,000 remaining.

University of Minnesota health policy professor Lynn Blewett says there is a better alternative than a return to high-risk pools. It's called "reinsurance." In that approach, insurers pay into a pool that the federal government administers, using the funds to compensate health plans that incur unexpectedly high medical costs. It's basically an insurance program for insurers.

The big question is whether lawmakers will balk at the cost of keeping premiums down for consumers — whatever the approach, Blewett says.

"The rub is, where that funding is going to come from?" she says. "And is the federal government or the state government willing to put up the funding needed to make some of these fixes?"

The national plan Ryan proposes would subsidize high-risk pools with $25 billion of federal money over 10 years. The nonpartisan Commonwealth Fund estimates the approach could cost U.S. taxpayers much more than that — almost $178 billion a year.

Researchers at the consulting firm McKinsey & Company say reinsurance would likely cost about a third of what the high-risk pool option would.

This story is part of NPR's reporting partnership with Minnesota Public Radio and Kaiser Health News.

Copyright 2018 MPR News. To see more, visit MPR News.

SCOTT SIMON, HOST:

And House Republicans, as we noted, have met to discuss potential replacements for the Affordable Care Act. One suggestion to lower some people's premiums is to create what are called high-risk health insurance pools. But as Minnesota Public Radio's Mark Zdechlik reports, Minnesota tried this system once, and it was expensive.

MARK ZDECHLIK, BYLINE: The argument goes like this. Separate out the healthy people who don't cost very much to insure from people with pre-existing conditions. They could get health insurance through subsidized, high-risk coverage. Minnesota's newest congressman, Republican Jason Lewis, endorsed high-risk pools on CNN.

(SOUNDBITE OF TV SHOW, "STATE OF THE UNION")

JASON LEWIS: Minnesota had one of the best insurance pools - high-risk pools in the country.

NEERA TANDEN: Which failed in most states.

LEWIS: It was - and it was undone by the ACA.

ZDECHLIK: It's true that Obamacare banned state high-risk pools, including the Minnesota Comprehensive Health Association, or MCHA. That's because the ACA requires that insurers sell to everybody, regardless of their health. The high-risk pools were government-sponsored programs to help insure people other health plans refused to cover. That kept high-cost people out of the general insurance market and helped hold down costs for everybody else. Supporters tout a return to that approach as a smart way to bring down premiums. But, says Craig Britton of Plymouth, Minn...

CRAIG BRITTON: I think that's a lot of baloney.

ZDECHLIK: Britton was forced to buy MCHA coverage because of a pancreatitis diagnosis. He paid more than $18,000 a year in premiums.

BRITTON: That is catastrophic cost.

ZDECHLIK: That's the problem with high-risk pools, says Minnesota health department economist Stefan Gildemeister.

STEFAN GILDEMEISTER: It's not cheap coverage to the individual, and it's not cheap coverage to the system.

ZDECHLIK: MCHA premiums cost policyholders 25 percent more than conventional coverage.

GILDEMEISTER: So there were people out there without - who had a chronic disease or had a pre-existing condition who couldn't get a policy.

ZDECHLIK: And he says, for the insurer, even the higher premiums fell far short of covering the full cost to care for the roughly 25,000 people on MCHA. The program needed more than $173 million in subsidies in its final year of normal operation. The money came from fees on commercial insurance plans, essentially shifting the cost to people who get insurance through work.

University of Minnesota health policy Professor Lynn Blewett says there is a better alternative than a return to high-risk pools. It's called reinsurance, and it provides health plans with extra money if they get nailed with higher-than-expected costs. The big question, Blewett says, is whether lawmakers will balk at the cost of keeping premiums down for consumers, whatever the approach.

LYNN BLEWETT: That's the kind of rub, is where that funding is going to come from. And is the federal government or the state government willing to put up the funding needed to make some of these fixes?

ZDECHLIK: A national plan offered by Republican Speaker of the House Paul Ryan would fund high-risk pools with $25 billion over 10 years. The nonpartisan Commonwealth Fund estimates it would cost much more than that, almost $180 billion a year. Researchers at the consulting firm McKinsey & Company say reinsurance would likely cost about a third what the high-risk pool option would.

For NPR News, I'm Mark Zdechlik in St. Paul.

SIMON: And that story is part of a reporting partnership with NPR, Minnesota Public Radio and Kaiser Health News. Transcript provided by NPR, Copyright NPR.