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What are high risk pools?

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Republican healthcare plan would allow states to opt out of some regulations in favor of high risk pools

The newest iteration of the American Health Care Act, the Republican bill to repeal and replace the Affordable Care Act, would allow states to opt out of a few of the ACA’s insurance regulations.

If passed, the AHCA would allow states to opt out of the ACA’s essential health benefits and community rating requirements, as long as the states provide high-risk pools.

But what does all this mean? What are essential health benefits, community rating requirements, and high risk pools?

Essential Health Benefits

Essential health benefits, or EHBs, are ten services that must be covered by any insurer offering coverage on the individual market. The services include things like hospitalizations, maternity care, prescription coverage, and mental health and substance abuse treatment coverage.

Community Rating 

Community rating means insurers have to charge all enrollees the same premiums, regardless of health status. Prior to the ACA, insurers could “underwrite” consumers, meaning they could ask health questions and determine pre-existing conditions. The insurers could then charge sick consumers more, or deny them coverage altogether. While the AHCA would not allow insurers to deny people with pre-existing conditions, it would allow them to surcharge these consumers.

High Risk Pools

States could waive EHBs and community rating requirements by operating “high risk pools.” This is a state-operated coverage option for people locked out of the individual market. Before the ACA, it was for people who were denied coverage because of their pre-existing conditions. If the AHCA passes, it would be for people who could not afford to pay their surcharged premiums on the individual market. Before the ACA, 35 states operated high risk pools.

But what’s the philosophy behind high risk pools, and what do supporters and critics say about them?

Healthcare costs are very concentrated. The National Institute of Health Care Management reported 5 percent of Americans account for 40 percent of spending. The ACA tried to spread that risk across the entire individual market by requiring everyone to get coverage, but it hasn’t worked as well as its architects had hoped. Enrollees have been sicker than expected, meaning costs have gone up for everyone.

The idea of high risk pools is to actually remove these sicker, more expensive, “high risk” consumers from the individual market, and put them in their own “risk pool.” The AHCA would allocate $15 billion to federally fund these risk pools, which would eventually be state-funded and operated.

What do supporters say?

Proponents say by separating the higher-risk consumers, costs for people without pre-existing conditions will go down. This is likely true.

"By having taxpayers, I think, step up and focus on, through risk pools, subsidizing care for people with catastrophic illnesses, those losses don't have to be covered by everybody else [buying insurance], and we stabilize their plans," said House Speaker Paul Ryan.

What do critics say?

Opponents of high risk pools say it’s all about the funding. Many of the pre-ACA high risk pools were underfunded, leaving consumers on wait lists or unable to get coverage for certain conditions. Critics have expressed concerns that $15 billion is not enough to cover the country’s high risk population.

“Many states had to turn applicants away — in some states, only a small percentage of those who applied received coverage — and the insurance was sharply limited to control spending. In Washington, over 80 percent of the people referred to the state’s high-risk pool never got health insurance, said Mike Kreidler, the state’s insurance commissioner,” according to the New York Times.

If you like this article, you may also like “Why are insurers pulling out of Obamacare?

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