How a Maine experiment fuels the new GOP bid to replace Obamacare

Bangor Daily News (ME)

May 03--Republican leaders in Congress are taking another crack at health reform, and now they're holding up Maine as an example.

After abandoning their last plan to replace the Affordable Care Act due to lack of support from within the party, Republicans have a new pitch that they hope will woo their more conservative members.

On Sunday's "Meet the Press," Vice President Mike Pence described how Republicans "are borrowing an idea from the state of Maine that has seen a significant drop in premiums for people on their health insurance."

That idea is called a "high-risk pool." While the term might make you think of an ill-advised swim in an old gravel pit, here's what this concept actually involves and how it worked in Maine.

Healthy people pay for the medical costs of sick people. In any given year, the healthiest 50 percent of the population makes up less than 3 percent of all health care costs, while the sickest 10 percent account for nearly two-thirds, according to the Kaiser Family Foundation. Private health insurance (the kind you get through work or buy directly from an insurer, and not including Medicare or Medicaid) basically uses the premiums that healthier enrollees pay to help cover medical claims for the small fraction of sick enrollees who cost a lot.

High-risk pools lump the sickest, or "highest risk" people into a "pool" and use tax dollars or other funds to help cover their costs. The theory is that this encourages insurers to sell plans to sick people -- typically those with pre-existing medical conditions -- rather than just denying them.

In 2011, Maine adopted a high-risk pool in an attempt to make premiums more affordable for people who buy their own private health insurance, known as the "individual market." Think self-employed workers or early retirees, who earn too much or aren't old enough to qualify for government health insurance, and also can't get insurance through an employer. Historically, including well before the Affordable Care Act, they faced the highest premiums, if they could get coverage at all.

Here's how Maine's program worked. Insurers tried to predict which of these individuals would be the riskiest for them to cover. In other words, who would cost them the most, based on a medical questionnaire? If you had certain diagnoses, such as kidney failure or various cancers, the insurer would still cover you, but you'd be lumped into the high-risk pool. Consumers never had any idea that they'd been selected for this little club, which is why this kind of arrangement is referred to as "invisible risk sharing."

Behind the scenes, the insurer agreed to pay a small portion of your claim costs, and forked over 90 percent of the premiums you paid to help fund the pool. Along with that, everyone else with private health insurance helped to pay for your medical claims, through a fee of $4 every month. That added another $21 million into the system to subsidize the medical care of those in the high-risk pool.

The pool was run by a nonprofit board called the Maine Guaranteed Access Reinsurance Association, created under a Republican health reform law known as Public Law 90.

Then the ACA came along, making it hard to judge the program's effects. Maine's high-risk pool ran for only 18 months before the ACA superseded it. Pinpointing how policy changes like this affect the already complicated health insurance market is difficult to begin with, and with fewer than two years of data to examine, it's even harder. Plus, the state law included many other health reforms that muddy the waters even more.

That being said, here are the arguments for and against the program.

Proponents claim it slashed premiums. "Maine policymakers were able to cut premiums in half while still guaranteeing those with pre-existing conditions access to plans," conservatives who helped pass the law recently wrote in the Health Affairs blog.

Unlike "traditional" high-risk pools, Maine's allowed people with pre-existing conditions to shop for the same insurance plans as everyone else and didn't charge them higher premiums, they wrote.

The success of the law, proponents say, was also due to the fact that Maine began allowing insurers more flexibility to charge rates based on age. Before, insurers could charge an older person only up to 1.5 times more than a younger individual, but PL 90 allowed them to charge up to three times more. That encouraged insurers to offer cheaper policies to young and healthy consumers, whose premiums then helped to offset the costs of older, sicker policyholders, they said.

The law also allowed insurers to adjust their rates based on where policyholders lived.

Anthem, the largest insurer in that market at the time, sought to increase rates by 1.7 percent. Without the program, the company would have jacked up premiums by more than 20 percent, it told the state insurance bureau in 2013.

Skeptics say it's not that simple. Under the law, insurers could vary rates depending on age only for new policies, not for existing customers who decided to keep their plan. So older, sicker customers predictably hung onto their existing plans with lower premiums, while younger ones who benefited under the law opted for new policies, health policy experts Nicholas Bagley and Mark Hall countered in another Health Affairs blog post.

At the same time, coverage got a lot skimpier, they wrote. A new policy, for example, doubled the amount of out-of-pocket costs consumers had to pay and dropped maternity coverage entirely.

One independent report found that while PL 90's reforms would likely lower premiums for most people in the individual market in the first year, those monthly costs could still swing widely from year to year. And older people in rural areas Down East and up north would pay more.

High-risk pools can work in theory, but only if they're properly funded, said Mitchell Stein, a health policy expert who worked for the advocacy group Consumers for Affordable Health Care when Maine passed PL 90. They usually aren't and historically have failed, leaving people with pre-existing conditions facing unaffordable premiums, he said. "It all comes down to money, as it usually does," Stein said.

Under congressional Republicans' plan, $110 billion would fund a high-risk pool over 10 years. One study estimates that it would cost at least $178 billion every year to adequately fund it. "The dollar amounts the Republicans are talking about are woefully inadequate chump change," Stein said.

The Republicans' current plan to replace the ACA replacement, called the American Health Care Act, also would allow states to drop protections for people with pre-existing conditions. Under Maine's program, insurers were required to offer them coverage.

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