ACA Road to Repeal: Will High-Risk Pools Return?

Congress has begun to set the wheels in motion to repeal the ACA. With this, legislators are looking at a host of options to serve as a replacement. One such option, proposed by House Speaker Paul Ryan (R-WI) and others in various permutations, is the return of high-risk pools.

Risk Pools Before the ACA

Prior to the ACA, 35 states had established risk pools — a guarantee-issued coverage offered to those who could not obtain coverage because of pre-existing or chronic health conditions, reports the Kaiser Family Foundation (KFF).

These high-risk pools "pooled" together individuals with high medical expenses to avoid driving up the health insurance costs of healthier groups of people. Although each state's risk pool was unique, most pools contained similar features such as high deductibles, exclusions on pre-existing conditions for 6 to 12 months, limits on lifetime and annual dollars and limited benefit options.

The KFF reports that, at their height, pre-ACA risk pools supported approximately 200,000 individuals. These high-risk pools were structured to limit enrollment, possibly accounting for the small participation numbers.

Overall, pre-ACA risk pools were considered failures, as many individuals didn't obtain coverage because of high costs and exclusions on pre-existing conditions. Additionally, these risk pools were traditionally underfunded, as states were reluctant to subsidize any funding requirements after the application of federal grants. Being underfunded prevented these risk pools from providing certain necessary health care services to the populations served. The ACA put an end to these pools by requiring that individual and small-group insurers cover all individuals, regardless of pre-existing conditions.

A Better Way

Paul Ryan's replacement proposal, A Better Way, sees robust high-risk pools as a way to help states increase the number of patients with health coverage. "High-risk pools give financial support for those who find themselves priced out of coverage, helping ensure all Americans have access to affordable health care," the replacement proposal states. The plan proposes that $25 billion in federal funds be dedicated for these programs. Additionally, high-risk pool premiums would be capped and waiting lists prohibited.

A Better Way also recommends eliminating the individual coverage mandate. The ACA's individual coverage mandate is aimed at addressing the risk pool issue, by requiring all individuals to purchase coverage, which spreads the risk of higher medical costs. However, data has indicated that sicker populations obtained coverage whereas healthier, younger individuals chose to pay the annual penalty in lieu of obtaining coverage. As a result, the premiums in ACA marketplaces have dramatically increased. Ryan's plan allows individuals with pre-existing or chronic health conditions to have coverage as long as such coverage is continuous.

According to the Kaiser Family Foundation, every 2 years approximately 32 million individuals lose coverage, resulting in coverage gaps. If an individual with a pre-existing condition breaks coverage, they could face future obstacles to obtaining affordable health care.

Empowering Patients First Act of 2015

Rep. Tom Price (R-GA), who is President Donald Trump's Department of Health and Human Services secretary nominee, also proposed a replacement plan — the Empowering Patients First Act of 2015, which contains an implementation of high-risk pools.

The plan would invest $3 billion of federal funds over a three-year time period into state-established high-risk pools covering those who are unable to purchase affordable coverage due to pre-existing conditions. Whether a $3 billion investment or Paul Ryan's proposal of $25 billion would be adequate remains to be seen.

Patient Freedom Act of 2017

On Jan. 23, 2017, Sens. Bill Cassidy (R-LA), Susan Collins (R-ME), Johnny Isakson (R-GA) and Shelley Moore Capito (R-WV) introduced the Patient Freedom Act of 2017, which addresses both the repeal and replacement of the ACA. This legislation does not provide for state-managed high-risk pools, but permits states to adopt a reinsurance and risk-corridor program that involves no Federal funds.

Although details of the repeal and replacement of the ACA are still in development, it is important for HR leaders to consider these possible plans to start to form a picture of what the future of health care for employers may look like.