The Indian Express (Delhi Edition)
High risk by name
Without plenty of cash, high-risk pools would be a poor replacement for the Affordable Care Act
AS REPUBLICANS seek to carry out their promise to repeal the Affordable Care Act (ACA), they must keep an eye on their own political health. “Obamacare” may be unpopular, but its components are not. A celebrated part of the law bans insurers from turning away customers who have pre-existing medical conditions. Before the ACA, insurers would routinely deny coverage to those with even minor or old blots on their medical histories. At a recent question-and-answer session, Paul Ryan, the Speaker of the House of Representatives, was confronted by a man who, thanks to a cancer diagnosis, owed his life to this Obamacare rule. Mr Ryan promised the voter that the GOP’S desired ACA overhaul would not have left him for dead. Instead, he could have joined a “high-risk pool”. Beloved by the right, these pools feature in almost every Obamacare alternative, including the one penned by Tom Price, Donald Trump’s pick to be health secretary.
The idea is to hive unhealthy people off into their own dedicated market and then subsidise their coverage. It reverses the logic of the ACA, which lumped everyone together to spread costs around. The law sent premiums skyrocketing for healthy folk who buy their insurance themselves, rather than through an employer. Whittling out higherrisk people from the market would bring those premiums back down. Middle-income earners too well-off to qualify for Obamacare’s tax credits, who have suffered the most from higher costs, would surely cheer such a reform.
Thirty-five states ran high-risk pools before the ACA. The biggest and most successful was the Minnesota Comprehensive Health Association (MCHA, or “em-sha”). Established in 1976, MCHA covered 27,000 Minnesotans with pre-existing conditions in 2011, about 10% of the relevant market. It offered a selection of plans, from near-total coverage to catastrophe-only insurance. All provided good, though not unlimited, care.
Separating high-risk people out does not make their costs disappear. Minnesota paid for MCHA in two ways. First, premiums were up to 25% higher than elsewhere. After those were collected, a levy on other health insurance plans covered its losses. This tax inflated healthy folks’ premiums much less than Obamacare does, partly because it applied to a broad base which included employerprovided coverage.
MCHA helped create a stable market, argues Peter Nelson of the Centre of the American Experiment, a conservative thinktank. The ACA, by contrast, has led to something of a mess. In 2015 insurers’ costs were 16% higher than their revenue from premiums. Blue Cross Blue Shield, an insurer which covered 103,000 people, has left Minnesota’s market, blaming massive losses. The state is likely to hand out $300m to cushion the blow from huge premium increases for 2017, which by one measure reached 59%.
Little wonder that some pine for the return of high-risk pools. But MCHA was the exception rather than the norm. Many states starved high-risk pools of cash. Florida’s contained only about 200 people in 2011. Premiums were commonly twice the normal rate. Many states had enrolment caps, meaning that even people willing to fork over were not guaranteed coverage.
That makes worries on the left — that high-risk pools provide cover for denying care to the ill — look justified. (At the women’s march on Washington on January 21st, one wonkish protester wielded a placard proclaiming “high risk pool?affordable health care”). Not even MCHA was accessible to everyone who needed it. In 2014 a 45year-old paid about $350-400 a month for an MCHA plan with a $2,000 deductible. That seems a stretch for someone earning $24,000 a year, the income at which single-person households in Minnesota cease to be eligible for Medicaid or “Minnesotacare” (two government-run insurance programmes for the poor).
Remarkably, nobody knows precisely how many people could not afford MCHA. But using the obesity rate to guess the proportion of people with pre-existing conditions suggests that MCHA fell well short of covering all of them, says Lynn Blewett of the University of Minnesota.
That suggests still greater subsidies would be needed to replicate Obamacare’s goal of universal coverage for the alreadysick. Minnesota’s high-risk pool lost about $6,000 per enrollee in 2011. Covering such losses for the same proportion of the market nationwide would cost about $11bn a year, The Economist estimates. Mr Ryan’s plan offers $2.5bn a year in federal funds. Many states would be reluctant to make up the shortfall.
High-risk pools are in some ways preferable to Obamacare’s complex system of behind-the-scenes redistribution, which is hard on middle-earners who lack employerprovided coverage. But without generous, sustainable funding, high-risk pools could be a treacherous alternative.