In a last-minute effort to avoid going home to their constituents with nothing to show for their effort to repeal and replace the Affordable Care Act, House Republicans on Thursday were working on an amendment to their proposed alternative. A draft of the amendment making the rounds Thursday morning indicated that the aim is to create a new $15 billion reinsurance fund called the “Federal Invisible Risk Sharing Program” to compensate insurance companies for covering people at high risk of incurring large medical costs.
In theory, the move would push premiums down for healthy individuals -- something the conservative House Freedom Caucus had been demanding -- by eliminating some of the risk within the universe of people covered by a particular insurer. However, the description of the plan in the brief amendment were so vague that it was difficult to know exactly how the program would work, especially given the confusion around whether the GOP plans to try to eliminate the ACA’s ban on discrimination against people with pre-existing conditions and the requirement that all non-smokers of the same age be offered identical coverage and pricing options.
In general, when an insurer identifies a consumer within its coverage pool who presents a risk (or a certainty) of very high costs, they would be able to apply to the risk sharing program for assistance. The company would remit a percentage of the premiums paid by those individuals to the agency administering the risk sharing program in exchange for a promise to pay the insurer back for costs of covering that patient above a certain threshold.
On Thursday morning, the plan was being widely referred to as creating “risk pools,” but experts point out that risk pools have typically involved states or the federal government setting themselves up as insurers of last resort for high-risk patients. This proposal is more properly viewed as a “reinsurance” plan, in which the state promises to, in effect, insure the insurance companies.
Like risk pools, the program would be designed to operate at a loss: insurers, on average, would be getting more money back in compensation than they paid in by transferring premium revenue to the program, with the government making up the difference.
The amendment being circulated Thursday would provide $15 billion over nine years to fund the program. But Karen Pollitz, a senior fellow for health reform and private insurance at the Kaiser Family Foundation, warned that is not even close to the amount of money a program like this would likely cost.
“Back in 2011 there were 35 states that had high-risk pools -- this program is a kind of cousin of high risk pools. The 35 state high risk pools combined covered a little over 200,000 people and the losses for those people was then about $1.2 billion per year.”
In 2011, a number of populous states including Ohio, Georgia, and North Carolina didn’t even have high-risk pools. In addition, many of the states that did have them imposed waiting periods, annual and lifetime dollar limits on coverage, and enrollment caps in order to keep costs down. Most of those tactics were eliminated under the ACA, and would be politically difficult to reinstate.
Bottom line, Pollitz said, the Federal Invisible Risk Sharing Program would be trying to cover many more people than the old risk pools did, and to do it without the cost control measures that those pools put in place.
“It doesn’t add up,” she said, adding that for a program like this one, “$15 billion really isn’t a lot of money.”
It was unclear on Thursday just how much the addition of the risk sharing program to the AHCA would change the math in the House, where conservative Republicans who wanted to pull the bill farther to the right and more moderate ones who were afraid it went too far currently have enough votes to prevent House leadership from assembling a majority in favor of the legislation. The bill currently has no Democratic support whatsoever.
On Thursday, House Speaker Paul Ryan said the change, “gets us closer together, closer to that consensus.” However, he added, “I want to be clear: we still have more work to do.”