Minnesota’s Successful Risk Pool
Minnesota had a successful risk pool for many years until the ACA came into full force, with an enrollment of 30,000 people (roughly 15% of everyone in the 35 state risk pools that existed). A Health Affairs article discussed this success (see resources at the end of the article) as resulting from 4 factors:
“First, eligibility is broader than in some states. Anyone who is deemed medically eligible (meaning they have been turned down for private insurance coverage because of a medical condition), HIPAA eligible (meaning a person lost previous coverage and meets other requirements), or eligible under Health Care Tax Credit criteria can enroll in the high-risk pool. Persons are also allowed to enroll under presumptive eligibility, meaning they may enter the pool with just a doctor’s diagnosis. Spouses, children, and other dependents of enrollees are also eligible to join the pool.”
“Second, the pool currently is adequately funded, so all those who need insurance and meet the eligibility criteria are covered. It is funded by enrollee premiums and annual assessments on companies that sell insurance policies in Minnesota (i.e., the fully insured market). At times, the pool has been supported by small state subsidies, including funding from the state’s tobacco-settlement funds. The stability of its funding and the fact that it has not had to rely as much on yearly state budget allocations has helped keep funding and enrollment steady.”
“A third reason the Minnesota high-risk pool has been relatively successful at reaching its intended target audience is that premiums are low compared to other states’ pools. Currently, Minnesota’s premiums are capped at 125 percent of the average cost for an individual buying insurance in the private market (and premiums have averaged about 119 percent of the private individual market in recent years). Other states have much higher premium caps, with at least twelve states having caps of 200 percent or more of the standard premium rate in those states’ insurance market, making insurance through the pool unaffordable to many who need it. Keeping insurance affordable also will be a challenge for fiscally strapped states, although it is possible that federal health reform, if passed, will include subsidies to help people purchase insurance.”
“A fourth reason why the Minnesota pool may be more successful is its administration. The program is a not-for-profit corporation governed by a board of directors and regulated by the Minnesota Department of Commerce. The board represents a wide range of interests and includes health care providers, hospitals, employers, insurance carriers, the Department of Commerce, and plan enrollees. Other states have similar governance structures, although not all have as much representation from consumers. The administrative structure also includes public oversight and a liberal policyholder appeal process.”
If the framework that Minnesota used to make their risk pool successful seems eminently reasonable, then you need to ask yourself why the other 34 risk pools didn’t use similar models.
Maine’s “Invisible” Risk Pool
Maine had tried some health insurance experiments that had sent its insurance system into a slow but relentless death spiral, caused largely by the lack of a participation requirement. This lack drove well people out of the market and made all premiums increase.
In 2011, Maine created an invisible risk pool and relaxed it’s premium rating bands, allowing for substantial premium savings and a reasonably decent safety net.
“As a result of these changes, individuals in their early 20s were able to see premium savings of nearly $5,000 per year, while individuals in their 60s saw savings of more than $7,000. As premiums dropped, more young and healthy applicants entered the market, total enrollment increased for the primary insurer in the market, and the individual market’s multi-year death spiral was finally reversed.”
Maine used a combination of reinsurance and a risk pool to manage high medical costs and pre-existing conditions. But, the plan didn’t remove people from the traditional insurance market or charge them higher premiums.
“All applicants were required to complete a health statement with their application for insurance. Insurers used the data provided to determine who to place in the invisible high-risk pool, but individuals were not treated differently. They were enrolled in the same plan they applied for at the same rates, whether placed in the invisible high-risk pool or not. In fact, enrollees had no idea that they were even in the high-risk pool, hence why it is called invisible.”
The reinsurance allowed the system to treat everyone as if they were healthy. It also stabilized the insurance market against the unpredictability of high claims.
“Here is how it worked in practice. The Maine invisible high-risk pool reimbursed insurers for 90 percent of individuals’ claims between $7,500 and $32,500 per year and 100 percent of claims more than $32,500.
Yet, because insurers bore the risk for up to $10,000 in claims (i.e. the first $7,500 plus 10 percent of the next $25,000), they had little incentive to inappropriately place people in the invisible high-risk pool as they lost almost all premium revenue but remained responsible for up to $10,000 in expenses.”
The funding system for the program was market driven as well:
“The program had two primary funding sources. As noted, insurers were required to transfer 90 percent of pool premiums to MGARA. This covered approximately 42 percent of all claim expenses paid by MGARA. The remainder of costs were financed by a $4 per member per month assessment on all policies — raising nearly $28 million on approximately 575,000 covered lives. These funds were sufficient to run the program, unlike many of the “traditional” high-risk pools that ran out of funds.”
I’ll end with some observations about what it seems to take to make a risk pool a viable part of a health care solution:
- The greatest infrastructure challenge is the stability of subsidy funding and the greatest threat to funding is the volatility of state tax revenues generally.
- The best available buffer to funding volatility is broad concrete stakeholder commitments. All who benefit from the existence of the risk pool need to step up to support it.
- The more the risk pool is included in the overall health insurance system, the less vulnerable it is to marginalization and financial degradation.
- As in all health care insurance solutions, stakeholder incentives must be carefully structured to avoid perversity of outcomes.
- High-Risk Pools For Uninsurable Individuals
- All High-Risk Pools Are Not Equal: Examining The Minnesota Model
- Invisible High-Risk Pools: How Congress Can Lower Premiums And Deal With Pre-Existing Conditions
- Best of Both Worlds: Uniting Universal Coverage and Personal Choice
in Health Care