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Previewing a House GOP Leaders’ Health Plan, #7: High-Risk Pools

House Speaker Paul Ryan said recently that uninsured people with pre-existing conditions could get coverage through high-risk pools if policymakers repealed the Affordable Care Act (ACA) provision barring insurers from denying coverage based on health status.  But that’s not likely a realistic option under a health plan from House GOP leaders.

High-risk pools combine sick people with even sicker people rather than pooling sick and healthy people together, as regular insurance does.  The pools consequently tend to charge extremely high premiums that people can ill afford — much more than what healthier people paid in the pre-ACA individual market.

Experience with state high-risk pools before the ACA shows that even these high premiums covered only about half of the cost of operating high-risk pools.  The rest had to come from public support, such as state general revenues or premium assessments on insurers.  Unless that support was substantial and rose significantly over time, states eventually had to scale back these pools to keep costs from spiraling out of control.  States sharply restricted enrollment, set premiums further above what many families could afford, and/or scaled back coverage (such as by cutting benefits, raising deductibles and other cost-sharing, imposing waiting periods for coverage of pre-existing conditions, and establishing lifetime dollar limits on benefits). 

Only 226,000 people in 35 states were enrolled in high-risk pools in 2011, on average — only 0.6 percent of the uninsured in those states at that time.  In 2008, only about 5 percent of those estimated to be eligible for those high-risk pools (because they had a chronic condition and were uninsured) were enrolled.  Research also shows that the pools’ high out-of-pocket costs and limited benefits — deductibles as high as $25,000 and annual benefit limits as low as $75,000 in some states — led to delayed or forgone care, adverse health outcomes, and medical debt among enrollees.

The Commonwealth Fund concludes that relying on high-risk pools to provide substantial coverage would be “extremely expensive and likely unsustainable.”  In fact, the Tax Policy Center estimated in 2008 that an adequately financed national high-risk pool system could easily cost more than $1 trillion over ten years, even though it would likely cover many fewer people than the ACA’s Medicaid expansion and marketplace subsidies and many enrollees would still be underinsured and go without needed care.

Even two conservative proponents of high-risk pools gave a rough, albeit much lower, estimate in 2010 that at least $15-$20 billion in annual federal funding would be needed to sustain a well-functioning system of high-risk pools.  That estimate, however, assumed enrollment of only about 2 to 4 million people.  In contrast, analysis from the Government Accountability Office indicates that many more people with pre-existing conditions would likely seek to enroll:  between 20 percent and 66 percent of all adults reported in 2009 that they had conditions (such as hypertension, mental health disorders, and cancer) that could lead insurers to deny them coverage or raise their premiums if they bought health insurance through the individual market.

House Republican and other conservative health plans don’t come anywhere close to the needed funding.  A plan from House Budget Committee Chair Tom Price includes $1 billion in seed funding to support existing state high-risk pools and help start new pools but no funding for ongoing operations after three years.  The Republican Study Committee’s 2015 plan provides no dedicated funding stream for its high-risk pools, merely authorizing Congress to appropriate up to $25 billion over ten years for this purpose.  Congress might never appropriate such funds, especially given the 2011 Budget Control Act’s austere annual caps on discretionary funds, which have shrunk even further due to sequestration.  Funding for non-defense discretionary programs, the budget area from which new funding for high-risk pools would have to come, is expected by 2018 to reach its lowest level as a share of gross domestic product on record in data going back to 1962, the Congressional Budget Office estimates.

Read the rest of our series previewing a House GOP leadership health plan here.