The new hope to repeal Obamacare: Invisible risk-sharing

After most House lawmakers left Washington for a two-week recess Thursday, members of the Rules Committee stayed behind to pass another fix to a bill Republicans hope will revive an effort to repeal portions of Obamacare.

The Palmer-Schweikert amendment, named after its House Freedom Caucus co-sponsors, congressmen Gary Palmer of Alaska and David Schweikert of Arizona, would set aside $15 billion for states to reimburse health insurance for covering sicker patients.

The policy, detailed in a four-page document, has the somewhat perplexing label of an “invisible risk-sharing program.” Supporters hope it will help convince GOP lawmakers that it is an adequate solution to deliver lower premiums while still guaranteeing access to coverage for people with pre-existing conditions.

Earlier in the week, much of the negotiations between the House and the White House had focused on allowing states to waive several insurance protections created under Obamacare, such as mandating that plans cover 10 essential health benefits, requiring insurers to offer coverage to those with pre-existing conditions and shielding the sickest customers from paying higher premiums than healthier customers.

Though legislative text to include these waivers in the American Health Care Act was never publicly released, supporters of the amendment passed Thursday say the subsidies would prevent more costly patients from driving up premiums for other customers.

“This amendment alone is real progress and it will help us build momentum toward delivering on our pledge to the country,” House Speaker Paul Ryan told reporters Thursday.

The Foundation for Government Accountability, a conservative group that supports the proposal and encouraged lawmakers to consider it, said they expect it will also lower the number of people who are uninsured.

The proposal involves allowing medical expenses of especially high-cost customers to be paid for in part by the program. It leaves some details unanswered. For instance, the amendment doesn’t specify which customers will be designated as high-cost, and instead requires the Department of Health and Human Services to develop a definition with states, consumers and health insurers to target which ailments are driving cost increases in certain areas.

Applicants who are buying a health plan would fill out a health statement. If they qualify then funds would be triggered to help pay for their care. The program would be designed so those enrollees wouldn’t know if they met the criteria, thus the “invisible” part. Once claims have met a particular threshold they would be paid out through the fund.

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Insurers would transfer most of the premium dollars from the designated customers into the program, and would be responsible for a set amount of claims before the assistance kicks in. The provisions prevent insurers from gaming the system by removing the opportunity to profit off individuals placed in the program, explains the Foundation for Government Accountability.

In the way the group has envisioned the proposal, once the claims have exceeded a threshold, they are reimbursed for those with pre-existing conditions out of the program, and at Medicare rates, which are set by the government and are lower than commercial rates.

It’s unclear how or whether the provision would fit into some of the mandates discussed earlier this week that states may be allowed to waive under a repeal plan. An analysis conducted by the consulting firm Milliman did not take these waivers into account when it evaluated the proposal on behalf of the Foundation for Government Accountability.

Tim Jost, emeritus professor at the Washington and Lee School of Law, predicted in a Health Affairs blog he authored that adopting the waiver amendments “would significantly undermine the benefits the [Palmer-Schweikert] amendment offers for improving access to health insurance coverage.”

The findings had mixed results in the Milliman analysis, which used specific conditions that would activate the risk-sharing programs, including chronic obstructive pulmonary disease, uterine cancer, prostate cancer, metastatic cancer, rheumatoid arthritis, congestive heart failure, renal failure and HIV/AIDs.

The study presumes that insurers would be allowed to charge older adults five times more than younger ones and adds that insurance companies would be able to determine other conditions that qualify enrollees as high risk.

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When projecting costs for a scenario in which doctors and hospitals would be reimbursed at the same level as Medicare, the program would cost $6.59 billion a year and reduce premiums by between 16 percent to 31 percent.

In a commercial rate scenario, however, the program would cost $11.27 billion a year and reduce premiums by between 16 percent to 23 percent.

If adequately funded, the analysis concluded, the program could reduce the number of uninsured by between 1.1 to 2.2 million people.

A similar proposal has been implemented at the state level before. To support its proposal, the Foundation for Government Accountability has pointed to an example of a similar program in 2011 in Maine, where the state was able to cut premiums in half.

“In effect, everyone was priced as if they were healthy because those with the known high risks were subsidized,” the authors wrote in a Health Affairs post. “By contrast, in a traditional guarantee issue environment, everyone is priced as if they are sick.”

The program reimbursed insurers for 90 percent of enrollees claims if they were between $7,500 and $32,500 a year, and for 100 percent of claims that were higher than $32,500.

It’s unclear whether the latest change will help Republicans coalesce around a plan to repeal Obamacare, but House GOP leaders have indicated that other changes to the bill are ahead.

Critics of the proposal say the fund is far from adequate.

“Whether it’s called an invisible high-risk pool or reinsurance, the key is whether it’s adequately funded over time,” tweeted Larry Levitt, senior vice president for special initiatives at the Kaiser Family Foundation. “$15 billion over 9 years is definitely not enough to make a meaningful difference in premiums or market stability.”

Nicholas Bagley, assistant professor of law at the University of Michigan Law School, wrote on the blog The Incidental Economist that “the invisible program is a minor tweak that won’t improve the American Health Care Act’s dismal coverage numbers” and that “the money is too insubstantial to make much of a difference.”

“Sure, $1.67 billion per year sounds like a lot of money,” he wrote. “But $1.67 billion is chump change compared to the subsidy reductions that are contemplated under the American Health Care Act. It’s like using a band-aid to treat a gunshot wound.”

Tarren Bragdon, CEO at the Foundation for Government Accountability, said that the money initially is meant to help the states run for a couple of years, and then states could dip into the $100 billion stability fund.

Others scrutinizing the proposal said that it looked similar to the reinsurance plan in Obamacare, called the “stability fund,” which states could use to help people pay for high medical costs. Under that program, funding reached nearly $16 billion in its first two years.

Bragdon rejected comparisons to the reinsurance program in Obamacare.

“It only applies to individuals buying outside of the exchange and outside an employer,” he said. “Those are the ones paying the full cost of a premium out of pocket … it limits the loss of people identified at the time of application to get lower premiums for them and anyone else; it’s extremely different from anything the Affordable Care Act does.”

This post originally appeared on Washington Examiner

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