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To replace Obamacare, GOP pushes 'high-risk' pool

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Craig Britton of Plymouth once had high-risk pool coverage.
Craig Britton of Plymouth once had high-risk pool coverage and said he thinks the argument for their return is "a lot of baloney."
Mark Zdechlik | MPR News

For many Republicans looking to scrap the Affordable Care Act, the fix will come from separating people into two pools.

The lower-cost one would be for healthy people. Those with expensive medical conditions that drive up health spending would be sorted into the more expensive "high-risk" pool. 

The goal is to hold down skyrocketing premiums for people who buy non-group insurance, but experts say high-risk pools create their own problems. 

Returning to them sounds simple, but the economics are terrible, said Karen Pollitz, a researcher with the nonpartisan Kaiser Family Foundation.

"The sickest 5 percent of people account for half of all health care spending in the entire population," she said, "so it is an expensive undertaking to segregate out people when they're sick and find another way to pay for their care."

Obamacare bans state high-risk pools, including the old Minnesota Comprehensive Health Association, or MCHA.

These government-sponsored programs sold health insurance to people other health plans refused to cover.  That kept high-cost people out of the general insurance market and helped hold down premiums. 

Supporters tout a return to that approach as a smart way to bring down premiums.

"Minnesota had one of the best insurance pools, high-risk insurance pools in the country and it was undone by the ACA," Minnesota GOP Rep. Jason Lewis said on CNN.

But the premiums don't go down for everyone.

Craig Britton of Plymouth was forced to buy MCHA coverage because of a pancreatitis diagnosis. 

He paid more than $18,000 a year in premiums. 

"That is catastrophic cost," he said. "You have to have a good living just to pay for insurance."

There's no disputing high-risk pool insurance is expensive, Minnesota state health economist Stefan Gildemeister said. 

"It's not cheap coverage to the individual, and it's not cheap coverage to the system," he said.

MCHA priced premiums for policy holders at 25 percent more than conventional coverage. 

That meant some people who needed the coverage couldn't afford it, Gildemeister said. "There were people out there who had a chronic disease or had a pre-existing condition who couldn't get a policy."

Gildemeister said even the higher premiums fell far short of covering the full cost of the insurance for the roughly 25,000 people on MCHA. The program needed more than $173 million in subsidies in its final year of normal operation.

The money came from fees on commercial insurance plans.

Gildemeister ran the numbers for a return to MCHA. Annual high-risk pool coverage for a 40-year-old would cost more than $15,000. The policy holder would pay about $6,000. The state would have to find more than $9,000 in subsidies.

A national plan offered by Republican House Speaker Paul Ryan would fund  high-risk pools with at least $25 billion over a decade. The nonpartisan Commonwealth Fund estimates it could cost much more than that — almost $180 billion per year.  

University of Minnesota health policy professor Lynn Blewett said there is a better alternative than a return to high-risk pools.

It's called "reinsurance," and provides health plans with a financial buffer should they get nailed with higher than expected costs. 

Researchers at the global consulting firm McKinsey & Co. say a reinsurance program would be much less expensive than high-risk pools. They estimate reinsurance would stabilize premiums for about a third the cost of restoring high-risk pools.

The big question, Blewett said, is whether lawmakers will balk at the cost of stabilizing premiums, whatever the approach.

"The rub is where that funding is going to come from," she said, "and is the federal government or the state government willing, you know, to put up the funding needed to make some of these fixes?"