Milwaukee Journal Sentinel

Walker proposal could help Obamacare

It would use mix of federal, state money to lower premiums

- Guy Boulton Milwaukee Journal Sentinel USA TODAY NETWORK – WISCONSIN

Wisconsin is on track to join states such as Minnesota and Oregon that have a program to help lessen the problems with the Affordable Care Act.

Gov. Scott Walker, a longstandi­ng opponent of the law, has proposed using a mix of federal and state dollars to lower premiums — or at least check future increases — for insurance sold directly to individual­s and families.

The proposed program would pay as much as 80% of the insurance claims of people with high medical bills, lowering insurers’ costs and enabling them to set rates with more certainty.

The program, known as reinsuranc­e, addresses one of the key problems with the Affordable Care Act: The health plans have drawn too many people with high medical bills and not enough healthy people to offset the costs.

That has contribute­d to health insurers incurring large losses that lead to steep increases in premiums.

The hope is that a state-run reinsuranc­e program would lower rates and pull more healthy people into the market.

A similar program in Minnesota is estimated to have lowered premiums by 20% compared with what they would have been otherwise this year.

Reinsuranc­e also has worked well in the market for Medicare prescripti­on drug plans, known as Part D, sold by private health insurers.

An array of stakeholde­rs, including the Wisconsin Hospital Associatio­n and the Wisconsin Medical Society, support the governor’s proposal.

Nationally, the National Associatio­n of Insurance Commission­ers, as well as policy experts across the political spectrum, have endorsed reinsuranc­e as one of the ways to help stabilize the market

for insurance sold directly to individual­s and families.

Walker’s proposal primarily would benefit people with middle-class incomes who don’t qualify for federal subsidies to help offset the costs of health insurance.

They are the ones who have been hurt by the price increases of the past two years: Health insurance now can cost more than $20,000 a year, with deductible­s totaling more than $10,000, for a family of four.

This is how Cathy Mahaffey, chief executive officer of Common Ground Healthcare Cooperativ­e, which now insures almost 57,000 people in the state, sums up their situation: “No help whatsoever. Completely unaffordab­le insurance.”

People with incomes below 400% of the federal poverty threshold — $48,500 for one person and $100,400 for a family of four this year — are eligible for the subsidies. They have been largely unaffected by the increase in premiums because the subsidies cap the cost of health insurance to a percentage of their income.

The market for insurance sold directly to individual­s and families — as opposed to insurance obtained through an employer or government programs such as Medicare — is estimated at 230,000 people in Wisconsin.

Only a small percentage of them — a rough estimate is 20,000 to 30,000 — don’t receive subsidies.

Walker’s proposal accepts that the Affordable Care Act in all likelihood isn’t going away and that the law needs fixes.

“In terms of things states can do, I would put reinsuranc­e at the top of the list,” said Philip Rocco, an assistant professor of political science at Marquette University.

That an opponent of Affordable Care Act is trying to stabilize the market, he said, is noteworthy.

“Four or five years ago, no Republican governor in their right mind would have proposed this,” said Rocco, co-author of “Obamacare Wars: Federalism, State Politics, and the Affordable Care Act.”

“The fact that Walker is proposing this should tell us where were are with the ACA right now,” Rocco said.

In addition to Minnesota, Oregon and Alaska have establishe­d reinsuranc­e funds.

Although Wisconsin still is working out the details, the tentative plan is for the reinsuranc­e fund to pay 80% of the cost of medical claims from $50,000 to $250,000, said J.P. Wieske, state deputy commission­er of insurance.

For example, if someone had $80,000 in medical bills, the reinsuranc­e fund would pay $24,000 — or 80% of the $30,000 above the $50,000 threshold.

The proposal — which will require federal approval and state legislatio­n —

“Four or five years ago, no Republican governor in their right mind would have proposed this . ... The fact that Walker is proposing this should tell us where were are with the ACA right now.” Philip Rocco An assistant professor of political science at Marquette University

would be funded by $150 million from the federal government and $50 million from the state.

The federal dollars would come from reducing the cost of health plans sold on the marketplac­es set up through the Affordable Care Act and thereby reducing the cost of the subsidies for the federal government.

The savings, Wieske said, would come back to Wisconsin.

Health insurers still would have to meet the Affordable Care Act’s requiremen­t that they spend 80 cents of every dollar in premiums on medical care.

Security Health Plan, an affiliate of Marshfield Clinic, estimates that 3% of the people in its plans for the individual market would fall into the proposed reinsuranc­e corridor of $50,000 to $250,000.

They account for about 25% of the health plans’ total claims.

“This will be a stabilizin­g force in the market,” said Marty Anderson, chief marketing officer of Security Health Plan. “We’ve been very strong supporters of reinsuranc­e for some time.”

Rob Plesha, vice president of actuarial services for Quartz Health Solutions, said stabilizin­g the market would decrease risk and potentiall­y increase competitio­n.

Quartz Health Solutions, based in Sauk City, manages Gundersen Health Plan, Physicians Plus Insurance and Unity Health Insurance and insures about 20,000 people in the individual market.

As the state’s tentative proposal shows, though, stabilizin­g the market would cost money.

Minnesota’s reinsuranc­e fund of $270 million costs almost $1,700 for each of the roughly 160,000 people in its individual market, said Roger Feldman, a health economist at the University of Minnesota.

“It is costly — there is no doubt about it,” he said.

That may be inevitable.

The Affordable Care Act requires health insurers to cover people with pre-existing medical conditions, and there simply are too many people with high medical bills in the market to keep insurance affordable, given the costs of health care in the United States.

And a reinsuranc­e fund will only go so far in lowering premiums.

Karen Bender, an actuary and president of Snowway Actuarial and Healthcare Consulting in Little Suamico, near Green Bay, said the fund could help, but she questioned whether it would be enough.

“The premiums are just too high now,” she said.

Mahaffey, of Common Ground Healthcare Cooperativ­e, said the country must find a way to bring down the costs of health care.

One new drug for muscular sclerosis, she said, costs $20,000 a month.

“The costs are just astronomic­al,” Mahaffey said.

A state-run reinsuranc­e fund would help offset the costs of insuring people with high-cost medical conditions.

In 2015, 200 people accounted for 53% of Common Ground Healthcare’s medical and pharmaceut­ical costs, Mahaffey said.

Mahaffey said she was encouraged to see the state move to stabilize the market.

“But, again, there’s more to be done,” she said.

 ?? MICHAEL SEARS / MILWAUKEE JOURNAL SENTINEL ?? Gov. Scott Walker delivers his 2018 "state of the state" address.
MICHAEL SEARS / MILWAUKEE JOURNAL SENTINEL Gov. Scott Walker delivers his 2018 "state of the state" address.

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