High-risk pools have been in the news a lot lately as an integral part of an Affordable Care Act replacement put forth by the GOP. Prior to the introduction of the Affordable Care Act in 2010, they were used in 35 states to insure people with pre-existing conditions.
What Are High-Risk Pools?
High-risk pools were specific insurance plans that provided coverage to people with pre-existing conditions that were turned down by the major health providers. The premiums were typically twice as high as it would be for individual insurance.
The Federal Government instated their own version of a high-risk pools temporarily before fully transitioning into the Affordable Care Act. It was called the Pre-existing Condition Insurance Plan (PCIP) and had updated features such as no waiting periods, no annual or lifetime limits on coverage, market average premiums, comprehensive benefits, and $5 billion in federal funding.
The Argument For High-Risk Pools
The Speaker of the House, Paul Ryan and many House Republicans stand firmly behind High-Risk pools as the solutions for our current healthcare woes. The general idea is that healthy people don't cost that much to insure so they should be separated from those who have pre-existing conditions such as chronic illnesses. Those people with the chronic and pre-existing conditions would purchase their healthcare in a separate "pool" that would be subsidized by the Federal Government and the state.
"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," said Paul Ryan in an interview with Charlie Rose.
Paul Ryan freuqently uses the example Minnesota being the most succesful high-risk pool prior to the Affordable Care Act. According to the Health Affairs Blog, there are four factors that made the Minnesota high-risk pool relatively successful. The eligibility was broader, it was adequately funded, the premiums were lower, and the administration, a state run board of Directors that represented a wide range of interests.
The Argument Against High-Risk Pools
When Craig Britton of Plymouth Minnesota was diagnosed with pancreatitis, he ended up having to pay $18,000 a year in premiums. The Minnesota high-risk pool cost policy holders 25% more than conventional coverage. "That is catastrophic cost," Britton says. "You have to have a good living just to pay for insurance."
"It's not cheap coverage to the individual, and it's not cheap coverage to the system," said Stefan Gildemeister, with the Minnesota Health Department. If the high-risk pools were re-instated, a 40 year old would pay $15,000, $6,000 the policy holder would pay and the rest would be subsidized.
The chart below shows the difference between marketplace costs and those of the high-risk pool.