Tag Archive: high risk pools

Return to high risk pools implies failure of ACA’s single statewide risk pool

The return to state high risk pools encouraged by Trump administration executive action and as proposed in the American Health Reform Act pending in the Senate — mechanisms phased out with the Patient Protection and Affordable Care Act reforms of the non-group segment effective in 2014 — carries with it a critical implication. Specifically, the individual market even with single statewide risk pools mandated by Section 1312(c) the Affordable Care Act are too small —  in some less populous states at least — to achieve a sufficient spread of risk. Therefore, the logic implies, individuals with conditions who use largely disproportionate amounts of medical care must be excluded from the statewide pool and cordoned off in high risk pools in order to maintain the pool’s actuarial viability and ward off adverse selection in the individual market.

That cuts against a core assumption of the Affordable Care Act — that by having all individuals and family members in a given state treated as one large risk pool, a sufficient spread of risk would be achieved. In addition, the law’s premium stabilization programs and an ongoing risk adjustment mechanism to compensate health plan issuers who take on members with costly, complex chronic conditions would act as buffers to ensure the actuarial integrity of the pool and reduce the likelihood of adverse selection. The proposed revival of high risk pools would suggest that’s not the case and the amount of medical care utilized by some pool members is so costly that it skews an entire state’s risk pool.

This in turn leads to a far larger implication. If 5 percent of the pool population account for 50 percent of the costs — or 1 percent accounting for 20 percent to use another expression of the ratio cited in this National Institute for Health Care Management data brief — then medical care may not be an insurable risk due to insufficient spread of risk. If that’s the case, it could result in plan issuers ceding most or all of the loss risk to the government as is currently the case in Medicare and Medicaid managed care. Notably, Aetna CEO Mark Bertolini reportedly suggested just that, according to this account at Reason.com, with nominal insurers taking on the role of plan administrators handling “back room” transactions:

The government doesn’t administer anything. The first thing they’ve ever tried to administer in social programs was the ACA, and that didn’t go so well. So the industry has always been the back room for government. If the government wants to pay all the bills, and employers want to stop offering coverage, and we can be there in a public private partnership to do the work we do today with Medicare, and with Medicaid at every state level, we run the Medicaid programs for them, then let’s have that conversation.

Note the second condition in Bertolini’s statement: If employers want to stop offering coverage. Complain as they may about rising premiums in group coverage, there’s no indication that the highly entrenched employee benefit model of covering medical care for the non-elderly is going to be abandoned by employers anytime soon. Even if the Affordable Care Act’s mandate on employers of 50 or more to offer coverage is repealed given favorable tax treatment of employer-sponsored medical care plans.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Feds encourage states to consider ACA Section 1332 waiver to fund reinsurance and high risk programs

The federal government is adopting a more flexible stance on state applications for waivers under Section 1332 of the Patient Protection and Affordable Care Act, particularly for states that want to create state reinsurance programs and high risk pools. Citing President Donald Trump’s January 20, 2017 executive order directing federal agencies to exercise maximum discretion possible within the law to reduce economic burdens imposed by the Affordable Care Act, the Health and Human Services Agency today encouraged states to utilize the Section 1332 state innovation waiver process to fund state reinsurance plans and high risk pools. “If a state’s plan under its waiver proposal is approved, a state may be able to receive pass through funding to help offset a portion of the costs for the high risk pool/state-operated reinsurance program,” HHS Secretary Tom Price wrote in a letter to state governors today.

Few states have shown interest in pursuing a Section 1332 waiver given the burdens of providing coverage on a par mandated by the Affordable Care Act while not requiring more federal funding than would otherwise be available under the law. Section 1332 allows the federal government to authorize states to opt out of most the law’s individual and small group health insurance market reforms including requirements to have a health benefit exchange, that plans provide specified essential health benefits as well as advance tax credit premium subsidies and reduced cost sharing for those households meeting income criteria. Also waivable are the individual and employer shared responsibility mandates. A budget reconciliation bill pending before Congress would zero out the penalties for noncompliance with those mandates.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

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