Would high-risk pools have enough money to function well?
If most people with expensive diseases consistently pay their premiums in the individual health care market, the high-risk pools envisioned in the House's replacement for Obamacare may be fairly small. And if HHS rejects state waivers if the federal funding set aside for the pools is running low, the pools may be able to do what they're supposed to — offer comprehensive health insurance to high-cost customers while shielding other customers from sharing the burden of their claims costs.
But both of those "ifs" are big ifs. And if the American Health Care Act's waiver proposal becomes law, Eric Temple of Ogden, Utah, isn't going to stick around to find out.
The waiver program says that states would be allowed to tell insurance companies they can charge more to the sick who have gaps in coverage of more than two months. Temple, whose family has been in the individual market for 26 years, isn't willing to go back to that pre-ACA approach.
When Temple, now 60, moved to Utah six years ago, he was enrolled in a high-risk pool because of his diabetes and high blood pressure. The policy had a $4,000 deductible, cost about $400 a month for one person, and had a lifetime cap of $1 million dollars. "It basically didn't pay for anything," he said, and the premium increased every six months, at least by $50.
His wife and one child then in college were covered under a separate plan, not in a high-risk pool, because their former state of Maryland had a special protection for breast cancer survivors, that they could never be moved out of the plan they had before their diagnosis.
It's his wife's health that makes Temple anxious and fearful about the Republican bill. She was a stay-at-home mom to their elementary-school aged children when she first was diagnosed about 15 years ago, and at that time, radiation treatments for the cancer that had spread to her brain damaged her memory in ways that makes it impractical for her to work full time, he said.
This year, the cancer returned in her bones and lungs, and is at stage 4. The cost is "$15,000 a month for her meds. That she needs to be on forever," Temple said. She's seven years too young for Medicare, and he remembers that the bills for the first round of cancer were $500,000. If Utah were to implement a high-risk pool with either an annual cap or a lifetime cap on claims, Temple thinks she could hit it.
When he was in the state's high-risk pool before Obamacare, it had a $400,000 annual cap and $1.5 million lifetime cap, he said. "So I would expect it would be about the same."
So if the bill becomes law, and Utah applies for a waiver, the couple will move.
"We would look at every state's options. California's talking about possibly going single payer," he said. "We would move wherever we need to move to keep her going."
The states at the top of his list — Washington, Oregon and California — are more expensive than Utah, which they chose as a place to retire because of its lower cost of living than the Washington, D.C. area. But Temple believes he has no choice.
Utah Gov. Gary Herbert, a Republican, was overruled by the state legislature on a Medicaid expansion. His office did not comment on whether it might apply for a waiver if AHCA becomes law. In January, he sent a letter to Congress that said he welcomed more authority for health care at the state level, but added: "We must be careful not to increase the rate of uninsured, particularly for our most vulnerable citizens. Reforms must be fiscally prudent but, should maintain or improve affordable access to health care for those that are currently covered."
IS THERE INTEREST?
High-risk pools existed in 35 states before Obamacare, and enrollees generally paid 1.5 to 2 times normal premiums to participate. According to the Kaiser Family Foundation, 33 pools had lifetime limits, most between $1 million and $2 million.
Even with the higher premiums, the cost to subsidize about 225,000 people in pools around the country was $1.2 billion, or $5,510 per enrollee, on average.
A separate federal high-risk pool, put into place as a transition before Obamacare exchanges were in place, had even higher costs, because it was restricted to those who had no insurance at the time they applied. There, average claims costs were $32,108, a year, and premiums were the same as for healthy people in the individual market.
Avalere Health consulting firm put out a study this week saying the $23 billion set aside in AHCA to fund pools for ill patients without continuous coverage would likely be insufficient. The money is supposed to last for nine years.
Whether the money runs out depends on three factors:
• How many states apply for waivers
• How many people with pre-existing conditions go without insurance
• Whether HHS responds to dwindling funding by rejecting waiver applications
Chris Sloan, author of the report, said Friday, "Even red states have sort of been noncommittal or even have said they wouldn't apply for a waiver. We are not expecting a lot of states to apply and get a waiver."
Calls from Modern Healthcare to Kentucky, Arkansas, Georgia, Florida, Texas, Tennessee and Wisconsin on whether they'd consider applying mostly went unanswered Friday. Florida's governor lauded AHCA's passage, but his spokeswoman did not have an answer on the waiver, saying, "Governor Scott has not read the entire bill. "
Wisconsin Gov. Scott Walker told the Milwaukee Journal-Sentinel today that he would certainly consider the option. "It depends on the conditions," he said.
Sloan said even if just a few states apply, but they're Texas, Florida and Georgia, the funding could run out. He projects that a substantial minority of those with pre-existing conditions would be moved to the pools, because subsidies would become less generous and Medicaid either doesn't cover most working adults in those states, or would no longer cover accept new enrollees because of Medicaid expansion restrictions in the new law. So many people, he believes, would have to stop paying premiums if their income drops. Many of the current ACA customers make modest incomes that fluctuate , either because they work part-time, seasonally or for themselves.
"They're really betting that almost no states take advantage, which is sort of insane," he said. "If that bet turns out, then yeah, fine."
AHCA also includes $100 billion over nine years for reinsurance, which was included in the ACA, but only for three years. The yearly amounts are more generous in than what was in the ACA. For Obamacare, reinsurance payments were $10 billion in the first year, $8 billion in the second and $6 billion in the third. This year, there was no reinsurance, which was a major factor in double-digit premium increases.
In AHCA, there would be $15 billion in reinsurance the first and second years and $10 billion each of the following seven years.
Sloan said, "That will be the big sweetener to get plans to stay in and lower premiums." He said between more generous subsidies for younger customers, the exit of some older customers who can't afford premiums with less generous subsidies, and the reinsurance, he thinks premiums could drop, not just go up more slowly than they would have without the support.
Temple, who owns a video production company, upgraded to a Gold plan when his wife's cancer came back. He had expected to spend $1,800 a month in premiums for the two of them, but at tax time, had to repay about $9,000 in subsidies, because last year's income came in higher than he'd projected, so they did not qualify for any subsidies.
Although Republicans have pointed to eye-popping premiums as a reason to repeal the Affordable Care Act—it's hardly living up to its promise to be affordable, they say—Temple has no complaints about the ACA. In fact, he feels so strongly about it that he made TV commercials for free to the Democratic opponent to his local congressman. Who only garnered 26% of the vote last November.
"There are people that are going to have catastrophic illness and it's going to medically bankrupt them," he said, if Obamacare is gutted. "It's at least apparent to me they're doing it to give Trump a victory he can claim. I think it's also become Republican dogma over the last few years, repeal and replace, I feel like they've kind of walked the plank and have to jump."
"I think they're not considering the ripple effects of how it'll effect the economy. Hospitals are going to close, nurses are going to get laid off, there's just going to be a huge ripple effect through lots of towns. It doesn't have to happen," Temple said.
Send us a letter
Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.