The Repubs say they have found the solution for what to do with people with pre-existing conditions so that healthy people won’t have to pay higher premiums to cover the cost of insuring the sick. Just create High Risk Pools in every state.
Can High Risk Pools work? The answer is NO.
Prior to the passage of Obamacare, 35 states used High Risk Pools of some sort to provide health insurance to residents under the age of 65 with pre-existing conditions. While we cannot be certain how the High Risk Pools envision by Trumpcare would work, we can assume that they would work-or really NOT work-- very much like the High Risk Pools states used prior to Obamacare.
Here are some of the common features of the previous state High Risk Pools and they problems they encountered.
1. State High Risk Pools covered only a fraction people with pre-existing conditions.
According to a Kaiser Family Foundation study about 27% of Americans under the age of 65 have pre-existing conditions. The average state High Risk Pool enrolled only about 2% of the non-group market, ranging from -.02% in Florida to 10.2% in Minnesota. In other words, even the most successful state-run High Risk Pool, covered less than half of people who needed coverage and most pools covered a tiny fraction. It is doubtful if the new Trumpcare pools will do any better. In short, most people with pre-existing conditions cannot look to High Risk Pools for help.
2. Premiums were much higher than in the non-group market.
Most state High Risk Pools charged 150% to 200% of the rates in the non-group market. We can expect Trumpcare High Risk Pools to do the same. If so, most people will be unable to afford coverage. Take a 64 year old making $26,500 per year. The CBO says his net premium under Trumpcare (premium after a tax credit of $4,900) will be $13,600 or half his income. If he is unlucky enough to have pre-existing condition, his premium in a High Risk Pool could be anywhere from $20,400 to $27,200 or three quarters to more than 100% of his income. He could not afford coverage.
3. Enrollees faced exclusions, high deductibles and lifetime limits on covered services.
Most state High Risk Pools excluded coverage for 6 to 12 months for people diagnosed with a pre-existing condition, set a lifetime limit on coverage of $1 million to $2 million, and had high deductibles ($1,000 to $5,000 per year or more).
4. All of the state High Risk Pools faced losses—expenses greater, often much greater, than premium revenue.
All of the states had to subsidize their High Risk Pools, usually by drawing from general revenues and/or from other revenue sources such as tobacco taxes or hospital assessments. The average subsidy was $5,510 per enrollee, on average. While the Federal Government provided grants in some years, the grants covered only 2% to 12% of program expenses. The states with High Risk Pools lost a combined $1 Billion a year or more resulting in most states eventually capping enrollment to control costs.
BOTTOM LINE: High Risk Pools have been tried. They don’t work. In fact, they can’t work because the math doesn't work. People with pre-existing conditions consume more health care at much higher costs. When these high health care cost people are placed in a group all to themselves, the average cost to cover their health care expenses skyrockets, resulting either in premiums out of reach for most people and/or the need to provide huge subsidies. The High Risk Pools eventually crumble under their own weight.
Here are a couple of links to the facts about High Risk Pools that you should make your Trumpcare fans read.