Explanation of High Risk Pools – Mr. Mip – Learn More CA Health Line 11.23.2016

Section §132 of the  AHCA   would invest $100 billion over 10 years into a Patient and State Stability Fund. States could use this money to bump up the size of the tax credits in the individual market (more on that in a minute), build high-risk pools for those with exceptionally costly medical conditions, or send money to insurers who get stuck with especially costly patients (people who have claims higher than $50,000 in a single year).  Vox 3.6.2017

Critics say even some of the most successful high-risk pools that operated before the advent of Obamacare were very expensive for patients enrolled in the plans, and for the people who subsidized them — which included state taxpayers and people with employer-based health insurance.  Craig Britton of Plymouth, Minn., once had a plan through Minnesota’s high-risk pool. It cost him $18,000 a year in premiums.  Britton was forced to buy the expensive coverage because of a pancreatitis diagnosis. He called the idea that high-risk pools are good for consumers “a lot of baloney.”  “That is catastrophic cost,” Britton said. “You have to have a good living just to pay for insurance.”

The argument in favor of high-risk pools goes like this: Separate the healthy people, who don’t cost very much to insure, from people who have preexisting medical conditions, such as a past serious illness or a chronic condition. Under GOP proposals, this second group, which insurers expect to use more medical care, would be encouraged to buy health insurance through high-risk insurance pools that are subsidized by states and the federal government.

Learn More

Commonwealth Fund 3.10.2017 – Why AHCA won’t stabilize Insurance Markets

Essential Facts – Health Reform – High Risk Pools

Refresher Course on High Risk Pools

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Here’s why $8 billion can’t meet the President and congressional Republicans’ commitments.

First, the House bill creates major problems for people with pre-existing conditions that the new funding doesn’t even purport to solve. These include:

  • Letting insurers once again put annual and lifetime limits on coverage for people with employer plans. If just one state capitalizes on the MacArthur amendment to largely or entirely eliminate requirements that plans cover “essential health benefits,” then large employer plans in every state could return to imposing lifetime and annual limits on coverage. As a Brookings analysis explains, that’s because the ACA’s ban on lifetime and annual limits only applies to essential health benefits, and large employers (even those that don’t have employees in multiple states) are free to decide which state’s definition of essential health benefits they want to adopt.[4] Before the ACA, 70 million people covered by large employers, including millions of children, faced lifetime limits on benefits, meaning that their health insurance coverage could end – for good – in the middle of a serious illness.[5]No amount of funding that House Republicans add to their bill can fix this: no matter what, millions of people with pre-existing conditions who have coverage through their employer would no longer be protected against caps that forced them to worry about exhausting their benefits each year – or for life.

Second, $8 billion — whether it goes for high-risk pools or other purposes — falls far short of closing the House bill’s funding gaps. Overall, $8 billion restores less than 1 percent of what the House bill cuts from programs that help people afford coverage.

But supposing the $8 billion is dedicated to high-risk pools:

  • The $8 billion falls far short of what’s needed to make high-risk pools sustainable. The $8 billion represents just a 6 percent increase in the $130 billion that the bill already includes for grants over the coming decade that states could potentially use for high-risk pools. But experts have concluded that $130 billion would leave these pools underfunded by at least $200 billion (and that estimate assumes that people would still have to pay premiums of roughly $10,000 a year). [12] Over ten years, the $8 billion increase wouldn’t even fill the funding shortfall for Michigan and Missouri, much less nationwide.Moreover, not all of the $130 billion would likely go for high-risk pools, as states can use these funds for a variety of purposes unrelated to people with pre-existing conditions — and the House bill provides no such funding whatsoever after 2026.
  • As history demonstrates, high-risk pools have serious, fundamental flaws. Where the ACA enabled people with pre-existing conditions to get the same kinds of insurance as everyone else, the amended House bill would segregate them in high-risk pools that pool sick people with even sicker people and consequently have proven to be financially unsustainable over time. Historically,[13] state high-risk pools have featured very high premiums, benefit exclusions, annual and lifetime limits, and other problems — even when the pools had enough funding to avoid waiting lists (which they often did not).

“The reported amendment seems to make the bill even worse for people with pre-existing conditions.” CNBC.com 

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Finally, the reported changes to the bill could make things even worse for people with pre-existing conditions. If, as reported, the $8 billion is available only for states that waive pre-existing conditions protections, that would add to the already strong incentives for states to drop these protections.[14] If more states dropped the protections in order to access the additional funding, people with pre-existing conditions in these states would be left much worse off than they would have been without the additional funding but with these protections in place.

Depending on the details, the pending changes to the House bill are either a drop in the bucket relative to its serious problems for people with pre-existing conditions or a further step in the wrong direction. Either way, the amended bill continues to break the President’s and congressional Republicans’ promises to protect the tens of millions of Americans who struggle with pre-existing health conditions.

The Major Risk Medical Insurance Fund currently funds expenses related to the Major Risk Medical Insurance Program, which was originally established as a state high-risk pool. The ACA has reduced the need for the high-risk pool because individuals cannot be denied coverage based on a pre-existing health condition. The Budget abolishes the Major Risk Medical Insurance Fund and proposes to transfer the fund balance to the newly established Health Care Services Plans Fines and Penalties Fund. This new fund will support coverage for individuals remaining in the Program and expenses related to health care services for children, seniors, persons with disabilities, and dual eligibles in the Medi-Cal program. Dhcs.CA.Gov Page 5

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Finding a fix is far from simple. Before ACA was passed, insurance companies evaluated the health of each person applying for coverage before offering a policy, and priced the plan to reflect the possible cost of care. The companies wanted to minimize the risk of losing money by paying for costly medical care for too many of their customers.

Often, insurers offered no options to people with pre-existing conditions, because they considered the potential costs to be too high. As a result, 35 states had high-risk pools, CA had Mr. MIP, above the program again on the lips of top lawmakers, including Mr. Ryan.

The high-risk programs offered a separate insurance pool for people with potentially expensive medical conditions. The idea is that by separating sick people from the majority of people who are healthy, insurers could offer cheaper rates to the healthy people. Insurers could charge higher prices to those with existing medical conditions, but they would also rely on other sources of funding, including from the government, to cover their costs. Learn More==> New York Times 1.22.2017

The Social Security Act (42 U.S.C. 301 et seq.) is amended by adding at the end the following new title:

“TITLE XXIIPATIENT AND STATE STABILITY FUND

“SEC. 2201. ESTABLISHMENT OF PROGRAM.

“There is hereby established the ‘Patient and State Stability Fund’ to be administered by the Secretary of Health and Human Services, acting through the Administrator of the Centers for Medicare & Medicaid Services (in this section referred to as the ‘Administrator’), to provide funding, in accordance with this title, to the 50 States and the District of Columbia (each referred to in this section as a ‘State’) during the period, subject to section 2204(c), beginning on January 1, 2018, and ending on December 31, 2026, for the purposes described in section 2202.

“SEC. 2202. USE OF FUNDS.

A State may use the funds allocated to the State under this title for any of the following purposes:

“(1) Helping, through the provision of financial assistance, high-risk individuals who do not have access to health insurance coverage offered through an employer enroll in health insurance coverage in the individual market in the State, as such market is defined by the State (whether through the establishment of a new mechanism or maintenance of an existing mechanism for such purpose).

“(2) Providing incentives to appropriate entities to enter into arrangements with the State to help stabilize premiums for health insurance coverage in the individual market, as such markets are defined by the State.

“(3) Reducing the cost for providing health insurance coverage in the individual market and small group market, as such markets are defined by the State, to individuals who have, or are projected to have, a high rate of utilization of health services (as measured by cost).

“(4) Promoting participation in the individual market and small group market in the State and increasing health insurance options available through such market.

“(5) Promoting access to preventive services; dental care services (whether preventive or medically necessary); vision care services (whether preventive or medically necessary); prevention, treatment, or recovery support services for individuals with mental or substance use disorders; or any combination of such services.

“(6) Providing payments, directly or indirectly, to health care providers for the provision of such health care services as are specified by the Administrator.

“(7) Providing assistance to reduce out-of-pocket costs, such as copayments, coinsurance, premiums, and deductibles, of individuals enrolled in health insurance coverage in the State.

“SEC. 2203. STATE ELIGIBILITY AND APPROVAL; DEFAULT SAFEGUARD.

“(a) Encouraging State Options For Allocations.—

“(1) IN GENERAL.—To be eligible for an allocation of funds under this title for a year during the period described in section 2201 for use for one or more purposes described in section 2202, a State shall submit to the Administrator an application at such time (but, in the case of allocations for 2018, not later than 45 days after the date of the enactment of this title and, in the case of allocations for a subsequent year, not later than March 31 of the previous year) and in such form and manner as specified by the Administrator and containing—

“(A) a description of how the funds will be used for such purposes;

“(B) a certification that the State will make, from non-Federal funds, expenditures for such purposes in an amount that is not less than the State percentage required for the year under section 2204(e)(1); and

“(C) such other information as the Administrator may require.

“(2) AUTOMATIC APPROVAL.—An application so submitted is approved unless the Administrator notifies the State submitting the application, not later than 60 days after the date of the submission of such application, that the application has been denied for not being in compliance with any requirement of this title and of the reason for such denial.

“(3) ONE-TIME APPLICATION.—If an application of a State is approved for a year, with respect to a purpose described in section 2202, such application shall be treated as approved, with respect to such purpose, for each subsequent year through 2026.

“(4) TREATMENT AS A STATE HEALTH CARE PROGRAM.—Any program receiving funds from an allocation for a State under this title, including pursuant to subsection (b), shall be considered to be a ‘State health care program’ for purposes of sections 1128, 1128A, and 1128B.

“(b) Default Federal Safeguard.—

“(1) IN GENERAL.—

“(A) 2018.—For allocations made under this title for 2018, in the case of a State that does not submit an application under subsection (a) by the 45-day submission date applicable to such year under subsection (a)(1) and in the case of a State that does submit such an application by such date that is not approved, subject to section 2204(e), the Administrator, in consultation with the State insurance commissioner, shall use the allocation that would otherwise be provided to the State under this title for such year, in accordance with paragraph (2), for such State.

“(B) 2019 THROUGH 2026.—In the case of a State that does not have in effect an approved application under this section for 2019 or a subsequent year beginning during the period described in section 2201, subject to section 2204(e), the Administrator, in consultation with the State insurance commissioner, shall use the allocation that would otherwise be provided to the State under this title for such year, in accordance with paragraph (2), for such State.

“(2) REQUIRED USE FOR MARKET STABILIZATION PAYMENTS TO ISSUERS.—Subject to section 2204(a), an allocation for a State made pursuant to paragraph (1) for a year shall be used to carry out the purpose described in section 2202(2) in such State by providing payments to appropriate entities described in such section with respect to claims that exceed $50,000 (or, with respect to allocations made under this title for 2020 or a subsequent year during the period specified in section 2201, such dollar amount specified by the Administrator), but do not exceed $350,000 (or, with respect to allocations made under this title for 2020 or a subsequent year during such period, such dollar amount specified by the Administrator), in an amount equal to 75 percent (or, with respect to allocations made under this title for 2020 or a subsequent year during such period, such percentage specified by the Administrator) of the amount of such claims.

“SEC. 2204. ALLOCATIONS.

“(a) Appropriation.—For the purpose of providing allocations for States (including pursuant to section 2203(b)) under this title there is appropriated, out of any money in the Treasury not otherwise appropriated—

“(1) for 2018, $15,000,000,000;

“(2) for 2019, $15,000,000,000;

“(3) for 2020, $10,000,000,000;

“(4) for 2021, $10,000,000,000;

“(5) for 2022, $10,000,000,000;

“(6) for 2023, $10,000,000,000;

“(7) for 2024, $10,000,000,000;

“(8) for 2025, $10,000,000,000; and

“(9) for 2026, $10,000,000,000.

“(b) Allocations.—

“(1) PAYMENT.—

“(A) IN GENERAL.—From amounts appropriated under subsection (a) for a year, the Administrator shall, with respect to a State and not later than the date specified under subparagraph (B) for such year, allocate, subject to subsection (e), for such State (including pursuant to section 2203(b)) the amount determined for such State and year under paragraph (2).

“(B) SPECIFIED DATE.—For purposes of subparagraph (A), the date specified in this subparagraph is—

“(i) for 2018, the date that is 45 days after the date of the enactment of this title; and

“(ii) for 2019 and subsequent years, January 1 of the respective year.

“(2) ALLOCATION AMOUNT DETERMINATIONS.—

“(A) FOR 2018 AND 2019.—

“(i) IN GENERAL.—For purposes of paragraph (1), the amount determined under this paragraph for 2018 and 2019 for a State is an amount equal to the sum of—

“(I) the relative incurred claims amount described in clause (ii) for such State and year; and

“(II) the relative uninsured and issuer participation amount described in clause (iv) for such State and year.

“(ii) RELATIVE INCURRED CLAIMS AMOUNT.—For purposes of clause (i), the relative incurred claims amount described in this clause for a State for 2018 and 2019 is the product of—

“(I) 85 percent of the amount appropriated under subsection (a) for the year; and

“(II) the relative State incurred claims proportion described in clause (iii) for such State and year.

“(iii) RELATIVE STATE INCURRED CLAIMS PROPORTION.—The relative State incurred claims proportion described in this clause for a State and year is the amount equal to the ratio of—

“(I) the adjusted incurred claims by the State, as reported through the medical loss ratio annual reporting under section 2718 of the Public Health Service Act for the third previous year; to

“(II) the sum of such adjusted incurred claims for all States, as so reported, for such third previous year.

“(iv) RELATIVE UNINSURED AND ISSUER PARTICIPATION AMOUNT.—For purposes of clause (i), the relative uninsured and issuer participation amount described in this clause for a State for 2018 and 2019 is the product of—

“(I) 15 percent of the amount appropriated under subsection (a) for the year; and

“(II) the relative State uninsured and issuer participation proportion described in clause (v) for such State and year.

“(v) RELATIVE STATE UNINSURED AND ISSUER PARTICIPATION PROPORTION.—The relative State uninsured and issuer participation proportion described in this clause for a State and year is—

“(I) in the case of a State not described in clause (vi) for such year, 0; and

“(II) in the case of a State described in clause (vi) for such year, the amount equal to the ratio of—

“(aa) the number of individuals residing in such State who for the third preceding year were not enrolled in a health plan or otherwise did not have health insurance coverage (including through a Federal or State health program) and whose income is below 100 percent of the poverty line applicable to a family of the size involved; to

“(bb) the sum of the number of such individuals for all States described in clause (vi) for the third preceding year.

“(vi) STATES DESCRIBED.—For purposes of clause (v), a State is described in this clause, with respect to 2018 and 2019, if the State satisfies either of the following criterion:

“(I) The number of individuals residing in such State and described in clause (v)(II)(aa) was higher in 2015 than 2013.

“(II) The State have fewer than three health insurance issuers offering qualified health plans through the Exchange for 2017.

“(B) FOR 2020 THROUGH 2026.—For purposes of paragraph (1), the amount determined under this paragraph for a year (beginning with 2020) during the period described in section 2201 for a State is an amount determined in accordance with an allocation methodology specified by the Administrator which—

“(i) takes into consideration the adjusted incurred claims of such State, the number of residents of such State who for the previous year were not enrolled in a health plan or otherwise did not have health insurance coverage (including through a Federal or State health program) and whose income is below 100 percent of the poverty line applicable to a family of the size involved, and the number of health insurance issuers participating in the insurance market in such State for such year;

“(ii) is established after consultation with health care consumers, health insurance issuers, State insurance commissioners, and other stakeholders and after taking into consideration additional cost and risk factors that may inhibit health care consumer and health insurance issuer participation; and

“(iii) reflects the goals of improving the health insurance risk pool, promoting a more competitive health insurance market, and increasing choice for health care consumers.

“(c) Annual Distribution Of Previous Year’s Remaining Funds.—In carrying out subsection (b), the Administrator shall, with respect to a year (beginning with 2020 and ending with 2027), not later than March 31 of such year—

“(1) determine the amount of funds, if any, from the amounts appropriated under subsection (a) for the previous year but not allocated for such previous year; and

“(2) if the Administrator determines that any funds were not so allocated for such previous year, allocate such remaining funds, in accordance with the allocation methodology specified pursuant to subsection (b)(2)(B)—

“(A) to States that have submitted an application approved under section 2203(a) for such previous year for any purpose for which such an application was approved; and

“(B) for States for which allocations were made pursuant to section 2203(b) for such previous year, to be used by the Administrator for such States, to carry out the purpose described in section 2202(2) in such States by providing payments to appropriate entities described in such section with respect to claims that exceed $1,000,000;

with, respect to a year before 2027, any remaining funds being made available for allocations to States for the subsequent year.

“(d) Availability.—Amounts appropriated under subsection (a) for a year and allocated to States in accordance with this section shall remain available for expenditure through December 31, 2027.

“(e) Conditions For And Limitations On Receipt Of Funds.—The Secretary may not make an allocation under this title for a State, with respect to a purpose described in section 2202—

“(1) in the case of an allocation that would be made to a State pursuant to section 2203(a), if the State does not agree that the State will make available non-Federal contributions towards such purpose in an amount equal to—

“(A) for 2020, 7 percent of the amount allocated under this subsection to such State for such year and purpose;

“(B) for 2021, 14 percent of the amount allocated under this subsection to such State for such year and purpose;

“(C) for 2022, 21 percent of the amount allocated under this subsection to such State for such year and purpose;

“(D) for 2023, 28 percent of the amount allocated under this subsection to such State for such year and purpose;

“(E) for 2024, 35 percent of the amount allocated under this subsection to such State for such year and purpose;

“(F) for 2025, 42 percent of the amount allocated under this subsection to such State for such year and purpose; and

“(G) for 2026, 50 percent of the amount allocated under this subsection to such State for such year and purpose;

“(2) in the case of an allocation that would be made for a State pursuant to section 2203(b), if the State does not agree that the State will make available non-Federal contributions towards such purpose in an amount equal to—

“(A) for 2020, 10 percent of the amount allocated under this subsection to such State for such year and purpose;

“(B) for 2021, 20 percent of the amount allocated under this subsection to such State for such year and purpose; and

“(C) for 2022, 30 percent of the amount allocated under this subsection to such State for such year and purpose;

“(D) for 2023, 40 percent of the amount allocated under this subsection to such State for such year and purpose;

“(E) for 2024, 50 percent of the amount allocated under this subsection to such State for such year and purpose;

“(F) for 2025, 50 percent of the amount allocated under this subsection to such State for such year and purpose; and

“(G) for 2026, 50 percent of the amount allocated under this subsection to such State for such year and purpose; or

“(3) if such an allocation for such purpose would not be permitted under subsection (c)(7) of section 2105 if such allocation were payment made under such section.”.

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