High-Risk Insurance Pools

There is a subpopulation within the United States which has relatively high health spending.  These people have for obvious reasons historically had difficulty finding health insurance in the individual market.  One of the supposed goals of the reform law was to make coverage available and affordable for these people through an individual mandate that would create large risk pools with average lower cost.  (In other words, make people who don’t need health care services pay for those who do.)  Because there are multiple insurers (not really anymore as the reform law becomes more and more successful (that is sarcasm)) on an exchange, however, it is uncertain what part of the overall risk pool a particular insurer will get.  So as part of the bribes offered to insurers under the reform law to get them to participate on the exchanges, various risk-sharing and reinsurance mechanisms were created to limit and share the cost of these high-spending individuals.  These mechanisms have come under legal and funding assault.  Alternatives have been proposed recently and a Kaiser Family Foundation paper discusses the history and issues around providing health insurance for the high-risk patient group.   (KFF Brief)

The new proposals build on state programs which existed before the reform law.  These generally created high-risk pools which subsidized insurance coverage for people who didn’t have employment-based coverage and weren’t able to buy it in the individual market, because generally insurers didn’t have to accept anyone who applied (those states that did mandate accepting all applicants, like New York, found it to be a disaster that made individual health insurance too expensive for everyone).  The high-risk pools in essence spread the cost of people who use a lot of health care services across the state tax base.  The pools tended to have some features, like use of pre-existing condition limitations and annual or lifetime maximums, that meant the financial issues for high-risk patients were not fully solved.  The reality is that there are people who have health needs that just aren’t affordable.   And some of these people engaged in behaviors that contributed to their health conditions that lead to high spending.  It seems fair to me to help people who have high health spending due to no fault of their own; but it seems very unfair to make responsible consumers pay for irresponsible ones.  Otherwise, where is the incentive to be responsible and isn’t one of the social obligations we all should shoulder the avoidance of being an unnecessary burden to our fellow citizens?  So any solution should be based on principles of real fairness.