High-risk pools, selling health insurance across state lines, and association health plans
WASHINGTON, February 22, 2017 — In three new issue briefs, the American Academy of Actuaries examines a number of key public policy considerations that policymakers should weigh when evaluating specific proposals for reforming or replacing the Affordable Care Act.
Developed by the Academy’s Individual and Small Group Markets Committee, the papers address high-risk pools, selling health insurance across state lines, and association health plans.
“As policymakers consider various ACA replacement or reform proposals, we’re focused on informing the debate with an explanation of how the specifics embedded in those proposals matter for the public, policyholders, private and government health care payers, and others,” said Academy Senior Health Fellow Cori Uccello. “Differences in a reform’s structure can have wide implications for stakeholders and for how it interacts with other reforms that have been or may be adopted. For example, high-risk pools can be structured in different ways, with different implications for access to coverage, premiums, and government spending. Further, how regulatory authority is defined for both cross-state insurance sales and association health plans affects whether insurers would compete on a level playing field.”
The three issue briefs, available on the Academy website at actuary.org, are:
- Using High-Risk Pools to Cover High-Risk Enrollees
- Association Health Plans
- Selling Insurance Across State Lines
Excerpts from: Using High-Risk Pools to Cover High-Risk Enrollees
The distribution of health care spending is skewed, with a small share of the population making up a large share of the spending. As a result, how to provide insurance coverage in the individual market and spread the costs of high-risk individuals is a key public policy question. Under the Affordable Care Act (ACA), individuals with pre-existing conditions are guaranteed that they cannot be denied insurance coverage or charged higher rates based on their health status.
Their higher costs are spread across all enrollees. To keep upward pressure on premiums from high-risk enrollment as low as possible, the ACA’s individual mandate and premium subsidies were designed to encourage enrollment of lower-cost people, thereby spreading the costs more broadly.
High-risk pools have been suggested as an alternative approach to covering the costs of high-risk individuals in the individual market, and many ACA replacement proposals include high-risk pool provisions. Goals of high-risk pool proposals include providing access to insurance coverage for high-risk enrollees, keeping premiums affordable, and improving stability in the individual market.
This issue brief provides an overview of three potential high-risk pool approaches to covering the costs of high-risk enrollees:
- A traditional high-risk pool, in which enrollees are moved into a separately run insurance pool managed by states or the federal government.
- A high-risk pool reimbursement program, in which enrollees remain in the private individual market and a portion of claims above a specific threshold is reimbursed by the high-risk pool.
- A condition-based high-risk pool reimbursement program, in which enrollees remain in the private individual market and a portion of claims for enrollees with a given set of conditions is reimbursed by the high-risk pool.
This issue brief provides a brief description of each approach and current examples that use the approach. Because the impact of a high-risk pool program on insurance coverage, premiums, and government spending depends on the details underlying its structure, the issue brief will examine the implications of various design features including eligibility criteria, benefit coverage, funding sources, and regulatory responsibility.
About the American Academy of Actuaries The American Academy of Actuaries is a 19,000 member professional association whose mission is to serve the public and the U.S. actuarial profession. For more than 50 years, the Academy has assisted public policymakers on all levels by providing leadership, objective expertise, and actuarial advice on risk and financial security issues. The Academy also sets qualification, practice, and professionalism standards for actuaries in the United States.