Have high risk health insurance pools been tried in practice?

Question

I have heard contradictory opinions on having high risk pools as a (partial) solution to healthcare direction in US. Some stating it's a good idea, some that it would blow up spectacularly if implemented (though it seems like the latter comes from biased source, namely insurance companies).

I know there are some theoretical economics studies on this, but have high risk health insurance pools been actually tried in practice? If so, what was the outcome?

Ideally examples from the USA; though I'd accept answers from elsewhere in the world if the US had no instances.

is https://en.wikipedia.org/wiki/Health_insurance_in_the_United_States#State_risk_pools what you are asking about? — , Jul 20 '17 at 21:29
@notstoreboughtdirt - "They serve a very small portion of the uninsurable market—about 182,000 people in the U.S. as of 2004,[39] and about 200,000 in 2008.[40]". And, that article has no outcomes listed as far as budgets etc... — user4012, Jul 20 '17 at 21:40
The VA system is essentially a high risk pool, albeit under a single-payer model. But, in general, private insurance (of any type) has always had high risk pools. The main outcome is that people pay higher premiums if they are high risk. — , Jul 21 '17 at 17:18
And of course, the benefit of a high-risk pool is that everyone else pays less, those in the high-risk pool pay more. Whether it's a "solution" or not would likely depend on what pool you end up in. :) — , Jul 21 '17 at 17:26
I think this is a very good, very specific question. I understand the theory of insurance and different methods (at least as a mathematician), but I don't know much about the attempts that this question asks about. I found this article that talks about attempts to run those pools. It's worth noting that high risk pools are probably better than nothing cause there's still some cost sharing and price setting and usually some subsidies, but such programs are still un-affordable by many. Scroll down http://www.kff.org/health-reform/issue-brief/high-risk-pools-for-uninsurable-individuals/ — userLTK, Jul 21 '17 at 19:14
@blip - with the caveat that most of my medical knowledge comes from watching E.R. reruns, much if not most costly medical stuff outside of cancer and geriatric care comes from things that are in large part the fault of the person themselves (bad diet, smoking, lack of exercise, or hell, lack of basic hygiene). I find that having those who made self-sacrifice to keep themselves healthier pay for those who didn't isn't really fair. — user4012, Jul 22 '17 at 03:15
@user4012 That may not be true. Infact, when you factor in social security, people who live long healthy lives cost society the most when all is said and done. People who smoke and die at 60 cost less. I don't want to get into a debate about this. I only want to point out that your statement isn't cut and dry truth. — userLTK, Jul 22 '17 at 07:02
@userLTK - (1) we aren't talking about cost of healthcare in general but a cost of insurance. (2) I very explicitly excluded cancers and geriatrics, if you note, just for the reason you outlined. — user4012, Jul 22 '17 at 12:06
@user4012 But, shouldn't a healthy person who participates in high risk activity pay more? Motocross, UFC, cow-tipping - to name a few. Ideally, a healthy person who takes no risks should pay the least. A healthy person who plays tackle football with his friends every weekend should pay more. Part of what insurance should cover is whether people get sick later cause some of the healthy people will get sick later in life. That's not to say there should be no division into categories, we just shouldn't pretend (like some people do) that the categories are guaranteed and permanent. — userLTK, Jul 23 '17 at 01:25

score 3 · Accepted Answer · edited Dec 18 '18 at 16:05

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Ted Nickel wrote I Ran Wisconsin's High-Risk Pool Before Obamacare. It Worked. (archived copy from archive.org).

The Milwaukee Journal-Sentinel said that the three largest programs in the United States were Minnesota, Texas, and Wisconsin. Also, the Patient Protection and Affordable Care Act (PPACA or ACA; colloquially known as Obamacare) ended those programs.

Politifact Wisconsin quotes Paul Ryan as saying:

Before Obamacare, Wisconsin’s "high-risk pool" for health insurance "had eight or nine" plans to choose from, people "could go to any doctor or any hospital they wanted, and their premiums and co-pays were cheaper than they are under Obamacare today."

They were able to confirm seven plans. In regards to prices, they said that the seven plans were nominally cheaper but could be regarded as more expensive due to medical inflation. I.e. if prices had increased as much for those plans as medical inflation under Obamacare, those plans would now be more expensive than Obamacare plans. Of course, if they didn't increase as much as medical inflation under Obamacare, then they might still be cheaper.

The other thing is that it's not really the point for the high risk plans themselves to be cheaper. The average price per capita between the old plans, both regular and high risk, was most likely less than the average cost of Obamacare plans. Note that Obamacare plans don't separate between high risk and other plans. That's why Ryan's statement was so shocking. Even the expensive plans in the old system were cheaper than the regular plans under the new system.

In general, mortality rates have been increasing (a negative result) since Obamacare. This analysis suggests why. Obamacare has increased premiums and copays of currently healthy people, making them less likely to consume health insurance. The increases in spending are on sick people, where it has less impact. So more people become fatally sick.

TL;DR: Yes, there were high risk pool programs prior to Obamacare. Conservative sources say they worked; liberal sources say they didn't.

edited Dec 18 '18 at 16:05

sleske

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answered Jul 21 '17 at 01:37

Brythan

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Just out of curiosity - the person who voted this down, could you say why? I think Paul Ryan is about as honest as your average used care salesman, so anything he says I'm skeptical about, but if this answer gets voted down, you should say why. – userLTK Jul 21 '17 at 09:04
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@userLTK I wasn't the downvoter, but the uninsured rate in Wisconsin dropped by about a third post-Obamacare. HIRSP only ever covered 24,000 people. ~30% of the funding for HIRSP came from a tax on other insurance plans in the state - it seems like a bit of slight-of-hand to say that's "no state tax dollars." They were $5000 deductable plans that still had annual premiums averaging over $6000. http://archive.jsonline.com/business/new-health-care-law-spells-end-to-states-high-risk-insurance-program-b9986769z1-221958321.html – Bryan Krause Jul 21 '17 at 15:29
(24,000 people is .4% of the population in Wisconsin) – Bryan Krause Jul 21 '17 at 15:31
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@userLTK All downvotes carry a reason, for answers it's: "This answer is not useful" I don't know about the voter, but there are a lot of claims here that are not cited. I'd also like a refund on the 15 minutes of my life wasted on that random person's uncited speculation on mortality rates, which was total bull. They even say "it is a short exercise to attempt to confirm Wilper’s predictions", where they admit to trying to use statistics like a drunkard uses a lamppost, to prop themselves up rather than illumination. – Batman Jul 21 '17 at 17:23
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The mortality rate topic is oft-cited (namely coming from the federalist) but there is no real hard data connecting it directly to the ACA. In fact, a good part of the higher mortality rate is due to increase in drug and suicide (ie, mental health) issues while traditional factors (cancer and heart disease) have been flatlining for years. – Jul 21 '17 at 17:24
@AlexanderO'Mara I understand the request for citation. But the question asked was very specific and this was at least the start of a fair answer to it. When I posted my comment there was 1 down-vote and 0 comments. Stack Exchange encourages the person when they down-vote to say why. I felt the down-voter did a disservice by not saying why they down-voted. – userLTK Jul 21 '17 at 19:54
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@userLTK Encourages, but does not require. As Alex said, there is an intrinsic reason for any downvote which is provided by the site itself. I feel that using comments to try to badger people into explaining their down votes (but never their up votes beyond what the up button already says; why do you implicitly trust the rationale and honesty of one but not the other?), is bullying that tries to dissuade people from ever down-voting, and thus cheapens and lessens the effectiveness of the site. – zibadawa timmy Jul 23 '17 at 05:58

Royal Canadian Bandit · Answer 2 · 2017-07-24T07:32:43.460

A high risk pool is a specific way of distributing insurance costs. Essentially, if you are likely to make a claim, you pay higher premiums. This isn't unique to health care, it applies to any form of insurance.

Let's say you have 1000 drivers buying car insurance, who between them generate $100,000 of claims in any given year. (Real risk pools are much bigger, this is just for illustration.) You could charge everyone the same premium of $100 (plus overheads and profit for the insurance company).

Suppose the pool includes 200 drivers aged under 25, who collectively generate $40,000 of claims -- because they are less experienced and more likely to take risks. You could charge drivers under 25 a premium of $200, and the remaining 800 a premium of $75. How to set the risk pools is a business decision for the insurance company, subject to laws and regulations governing the industry.

Medical insurance pools can be divided similarly, based on age, medical history, and the like. In the USA private insurance is the main funding mechanism for health care; so this is politically controversial, because people in the high-risk pool may be charged very high premiums through no fault of their own, or be unable to afford insurance at all.

This does not seem to answer the question of "has this been done?" — Erik, Jul 24 '17 at 09:54
It's done every day, by every insurance company in the world, including US health insurance companies. The political consequences depend on how high the premiums are in a "high-risk pool", and how far they are offset by government assistance. — Royal Canadian Bandit, Jul 25 '17 at 07:35

score -3 · Answer 3 · edited Dec 18 '18 at 22:05

Essentially, that's what we have today.

Obamacare requires insurance companies to accept anyone, regardless of existing conditions - a very good requirement, if it is managed.

Unfortunately, it wasn't. There is also no requirement to buy health insurance. Oh, there's an IRS penalty, but it's paltry compared to the cost of a policy.

Consequently, those least likely to get sick, younger people, just go without, and stay out of the pool. What you end up with is a high percentage of people needing expensive treatment in the pool.

Sort of like not having to buy car insurance until you had a wreck. Wouldn't that be great? Of course, the price would go through the roof... just like obamacare.

The only practical solution is to use the medicare model. Payroll deduction from everyone, so everyone pays into the pool. And the mechanism is already set up, just phase it in to younger groups. Why the repubs don't just do this is beyond me.

Why the dems didn't do it when they had both houses of congress is way beyond me. At one time, the democratic party was the party of the working class, those hit hardest by obamacare. Doesn't look like that's the case any more...

Have high risk health insurance pools been tried in practice?

3 Answers3