Healthcare risk-sharing could ease the fears of a risk-averse Congress
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One of the biggest sticking points as Congress moves to repeal ObamaCare is how to handle the issue of individuals with pre-existing conditions. Some Republicans have even pledged to vote against any repeal and replace effort that fails to address this problem.

Yet there must be a better way than the current top-down, heavy-handed approach that has led to skyrocketing premiums in the private market. Thankfully, an amendment to the American Health Care Act announced this morning may provide a bridge over the current repeal and replace divide.

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The amendment would allow the secretary of Health and Human Services to use $15 billion to set up an “invisible risk-sharing program,” with states having the option to take over the program in later years. The secretary would have a lot of discretion to administer the program, but if set up correctly, this program has significant potential to lower premiums across the private market, help those with pre-existing conditions, and even reduce the number of people without insurance.

 

In fact, according to a new report commissioned by the Foundation for Government Accountability, an invisible risk-sharing program that follows a few simple principles could lower premiums by up to 31 percent, cover those with pre-existing conditions, and reduce the number of people without health insurance by up to 2 million. 

This concept of invisible risk-sharing is based on state-level success and a successful model has four basic components:

  • When individuals apply for insurance, they fill out a basic health assessment. If they have certain medical conditions at the time of application, they are automatically enrolled in the program. Insurers are also able to voluntarily assign individuals expected to incur large medical expenses to the program. This enrollment happens prospectively, only at the time of application.
  • Individuals in the program are enrolled in the same plans at the same rates as everyone else in the private market. In fact, enrollees have no idea that they have even been designated for the program. Hence the descriptor: invisible.
  • Insurers transfer most of the premiums paid by those enrollees back to the program itself. Insurers also remain responsible for a set amount of claims before the program kicks in. These provisions help prevent insurance companies from gaming the system by removing the opportunity to profit off individuals placed in the program.
  • Claims for those in the program are reimbursed once they have exceeded a certain threshold. These claims are reimbursed at Medicare rates to ensure that program dollars are stretched as far as possible.

This approach is far from untested. In 2011, the state of Maine set up a risk-sharing program that followed these general principles and also expanded age bands. The results were tremendous.

After these changes went into effect, premiums in Maine dropped by up to 70 percent – and for better plans with lower deductibles. Younger enrollees began signing up voluntarily, helping reverse Maine’s death spiral. And the largest insurer in the individual market enjoyed unprecedented growth, increasing their membership by 13 percent in just 18 months.

Should Congress follow through with the AHCA and implement similar reforms, this success story can be replicated nationwide. Invisible risk-sharing is a fair and effective way to help those with pre-existing conditions get the coverage they need while lowering premiums for everyone. 

Jonathan Ingram (@IngramLaw) is vice president of research at the Foundation for Government Accountability (@TheFGA), a non-profit research organization dedicated to replacing failed health and welfare programs nationwide.


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