'High-Risk Pools' Have Been Tried Before In California. Did They Work?

May 9, 2017

California’s Republican congressmen were crucial to getting the American Health Care Act passed through the U.S. House of Representatives last week. One change to that bill was key in getting the support of at least one of those congressman: additional money for something known as ‘high-risk pools’.

However, they are not a new idea in health care and in fact have been tried before right here in the Golden State. California’s experience could help inform how the policy might work if it becomes law, and the challenges it could face.

Since the bill passed the house last week with just two votes to spare, every ‘yes’ vote was critical, including those of local congressmen Kevin McCarthy, Devin Nunes, David Valadao, Jeff Denham and Tom McClintock.

A day before the vote, Valadao told Valley Public Radio one element of the bill that he liked is the concept of ‘high-risk pools’ which would be akin to a separate insurance market for sick people.

“And so with the high risk pools, what you do is you create a way for the insurance companies to find a way hedge their costs which is go to the government so they can subsidies their highest cost patients. And so it is not being born by the average rate pay or insurance holder,” Valadao said.

Credit Office of Rep. David Valadao

First, an explanation.

In an amendment to the bill, Republicans set aside an additional $8 billion for the ‘high-risk pools’ in addition to the $130 billion already in the legislation. The money could be used by states if they decide to create the ‘pools’ and allow insurance companies to charge sick people higher premiums, something currently banned by the Affordable Care Act, often called ‘Obamacare’.

The idea is that if someone has a pre-existing condition, and gets charged higher premiums by insurers, they could go to the ‘high-risk pool’ to find affordable insurance. The result, in theory, is that the remaining people in the individual market would, in general, be more healthy, allowing insurers to charge lower premiums.

High-risk pools have actually been tried in several states before the Affordable Care Act became law, including right here in California.

Deborah Kelch is now the executive director of the Insure the Uninsured Project, but back in the early 1990’s she was a legislative analyst with the state when California set up a ‘high-risk’ insurance pool.

“You know, it wasn’t a good experience for the state or for the people who were enrolled,” Kelch says.

She says the bottom line is it just did not work. At its high point, it covered 22,000 people. However, more than 360,000 were estimated to have been eligible. Since everyone involved was sick, it cost way more than the state was willing to invest. As a result, the state capped what it would spend, so there were long waiting lists. And for people who did get in, the benefits for were considered poor.

“It just wasn’t an efficient way to meet the needs of these folks. And when the money was tight, it meant waiting lists. And it meant that people couldn’t get the coverage that they needed,” Kelch says.

"At some point in our lives, all of us will develop a pre-existing condition. And it is just a matter of whether you are unlucky enough to have to buy your own insurance when you have one," Cynthia Cox, Kaiser Family Foundation

Under the Affordable Care Act, insurers cannot charge sick people higher premiums, so the high risk pools became largely irrelevant although they still exist. However, the law also had the net effect of increasing premiums on healthy people to make sure they are affordable for the sick.

Kelch does not think the roughly $138 billion included in the bill is anywhere near what would be needed to establish affordable and effective high risk pools.

And there are a lot of people in California who could potentially be impacted if insurers are once again allowed to charge sick people higher premiums.

An analysis by the Kaiser Family Foundation found that about a quarter of non-elderly adults in California have a condition that left them uninsurable prior to the ACA.

Kaiser researcher Cynthia Cox says that means that right now about 5 million residents have a pre-existing condition.

“At some point in our lives, all of us will develop a pre-existing condition. And it is just a matter of whether you are unlucky enough to have to buy your own insurance when you have one. That is when it really starts to matter,” Cox says.

Cox adds a caveat that not all pre-existing conditions are created equal. Some are less expensive than others and may not require a steep rate increase. For example, heart disease or diabetes is much more expensive than depression, which is treatable with relatively inexpensive drugs.

But are the ‘high-risk pools’ popular with voters?

Since the bill only recently passed the House, there is not much polling about it, says California State University Bakersfield political scientist Dr. Jeanine Kraybill.

Jeanine Kraybill
Credit https://jeaninekraybillphd.com/

However, she says we can infer from the general popularity of the ACA’s provision banning companies from charging sick people more, it is unlikely that repealing that rule will be a winner with voters.

Still, Kraybill says since the repeal of Obamacare has been such a powerful political promise for years, Republicans basically ‘pigeonholed’ themselves with no choice but to vote for something likely to be unpopular.

“So now, I think, that you have some of these Republicans, particularly those very close to Donald Trump like Kevin McCarthy, who also ran with this idea that we are going to be repealing and replacing that they have to do it now. They have committed so much of themselves to doing it that they absolutely have to,” Kraybill says.

The vote and other actions by President Trump and the Republican majority could threaten their seats Kraybill says.

It was an especially touchy vote for Congressman Valadao, who represents a district with a double-digit Democratic voter registration advantage. So far, he has not drawn an official challenger yet.

But Congressman Devin Nunes has already drawn a Democratic challenger. And Congressman McCarthy is facing a primary challenge by a political newcomer who says the health care vote is the reason he is looking to unseat the House majority leader.

Unlike Valadao, however, both McCarthy and Nunes represent districts with a Republican registration advantage.

The bill has a long way to go, and the mid-term election is more than 18 months away, so it remains to be seen how much of a political price they might pay for voting for an unpopular bill that has the potential to strip insurance from potentially hundreds of thousands of their voters.