Why high-risk pools won’t work

The Commonwealth Fund
February 13, 2015
Why High Risk Pools (Still) Won't Work
By Jean P. Hall

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:

1. are prohibitively expensive to administer,

2. are prohibitively expensive for consumers to purchase, and

3. 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.

http://www.commonwealthfund.org/publications/blog/2015/feb/why-high-risk-pools-still-will-not-work

Brief: Why a National High-Risk Insurance Pool Is Not a Workable
Alternative to the Marketplace

http://www.commonwealthfund.org/~/media/files/publications/issue-brief/2014/dec/1792_hall_highrisk_pools.pdf

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Comment by Don McCanne

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.