As Republicans in St. Paul and Washington, D.C. scramble for a way to replace the Affordable Care Act, an old idea pioneered by Minnesota is getting a second look.
Minnesota was among the first states to create a “high-risk pool,” a state-sponsored insurance program for people who cannot buy private coverage because they are deemed too risky by commercial insurers.
The pool operated for more than three decades, and its experience shows that you can cover thousands of people who are denied coverage by private insurers — but that it isn’t cheap for the public or the patients.
A core reform in the federal health law, also known as Obamacare, is the requirement that insurers cover everyone, regardless of any current or past health problems. It proved highly popular with consumers who could not previously buy individual health insurance — some cancer survivors, for example, or people with severe asthma. But because it reduces insurers’ ability to manage risk, some legislators and insurance analysts say it has contributed to instability in the market, causing insurers to raise premiums and limit their offerings.
As an alternative, many Republicans propose that states sponsor high-risk pools, much as Minnesota did starting in 1976. By the time the Minnesota Comprehensive Health Association (MCHA) was phased out, as the ACA kicked in, it covered about 26,000 Minnesotans.
“It actually worked pretty well,” said Rep. Matt Dean, R-Dellwood, a health care leader in the House. “I think we need to look at everything we can do to protect the individual market.”
1976 Founding of MCHA, for people who couldn’t obtain individual coverage in the commercial market
26,000 Minnesotans covered
1-25% Amount that MCHA premiums exceeded avg. commercial rates
$181 million Shortfall between premiums collected by MCHA and its operating costs in 2013
1976 Founding of MCHA, for people who couldn’t obtain individual coverage in the commercial market
26,000 Minnesotans covered
1-25% Amount that MCHA premiums exceeded avg. commercial rates
$181 million Shortfall between premiums collected by MCHA and its operating costs in 2013
‘It was unaffordable’
Critics say the risk-pool approach penalizes people who had the misfortune of being sick in the past, regardless of their current health status. The pools charged above-market premiums, and many imposed high deductibles and tight coverage limits.
Ellie Beaver is one who knows Minnesota’s high-risk pool firsthand and believes the ACA is a big improvement.
Beaver turned to MCHA for coverage after she graduated from college. She had survived kidney cancer at age 5 thanks to surgery, chemotherapy and radiation, but that medical history still prompted a health insurer to deny her private coverage.
Beaver, now 38, was grateful for the state-sponsored coverage, but by the time she needed MCHA again in 2003, the cost had increased significantly.
“It was unaffordable for me,” Beaver said. “I went for about six months without health insurance coverage, which was definitely nerve-racking — not only because of the fear of the cancer coming back or some long-term effect from treatment. If somebody would invite me to play in a softball game, I would [say] ‘No,’ because if I sprained my ankle it’s going to bankrupt me.”
Today Beaver has health insurance through her work as government relations director in Minnesota for the American Cancer Society Cancer Action Network. But given her job, she still worries about how people with cancer get coverage when they can’t get insurance through work or a government program.
MCHA was a good strategy “for the environment that we were in prior to the health law,” Beaver added. “But the health law was an improvement over that system.”
However, some Minnesotans who used MCHA are now seeing even higher premiums in the volatile market under the ACA.
Mairi Doerr of Cannon Falls was unable to buy private coverage because of an asthma-related hospitalization, and she relied on MCHA for 30 years. When she switched from MCHA to a policy on the state’s MNsure exchange in 2015, Doerr found coverage comparable to the $500 a month that she had been paying.
“I consider myself a very healthy person,” Doerr said. “I live with asthma but it is not something that limits me. I am very active.”
Although her MCHA rates had increased steadily over the years, it was nothing like the premium increases she has seen in the individual market since the ACA took effect. One year after she made the switch, her 2016 monthly premium jumped 45 percent to about $750. This year, she faced another huge increase, to $1,300 a month.
Doerr never thought she would look back on the day when her MCHA rates looked reasonable.
“I was astounded,” Doerr said. “It was very tempting to say forget it. But if I can’t even get in to see my doctor if I don’t have an insurance card, then I am not going to take that risk.”
Last-minute shifts in the insurance market allowed her to find a plan at $1,000 a month, and Doerr may qualify for the state premium assistance recently passed by the Legislature.
Others say the individual market under the ACA has grown so volatile and expensive that it’s time to go back to high-risk pools. Dave Wiest is among them.
The last year Wiest purchased coverage through MCHA, he was 64 years old and his premium as a Hennepin County resident was about $540 per month. The coverage featured a $3,000 annual limit on total out-of-pocket expenses.
Now Wiest is covered by Medicare, but as an insurance agent, he follows consumers who are buying insurance through Minnesota’s individual market. For 2017, he said, a 64-year-old in Hennepin County is paying more than $1,100 per month, for a policy that requires $3,600 in out-of-pocket spending. What’s more, compared to MCHA it’s an inferior plan, he said, with a much more limited network of doctors and hospitals.
With the high-risk pool “I could go to Mayo — I could go virtually anywhere,” Wiest said.
More restrictions
Health plans in Minnesota’s individual market have much tighter networks this year to reduce costs. Plans sold throughout most of the state, for example, don’t include the Mayo Clinic as an in-network provider, even though survey data from 2013 showed that 38 percent of MCHA beneficiaries said access to Mayo was “extremely important.”
So far the idea of bringing back high-risk pools is still in the concept stage, with few details ironed out, such as the crucial issue of how they would be funded.
Premiums paid by members cover only part of a risk pool’s medical claims, so supplemental revenue would be needed to keep them afloat. MCHA, for example, was subsidized by an assessment on commercial insurers, and even so, there were questions about its long-term financial sustainability.
Sen. Tony Lourey, DFL-Kerrick, a health care leader in his party, said risk pools were an imperfect solution to the problem of managing high-cost patients. He says the Legislature or Congress could use tools such as reinsurance to cushion insurers against cost shocks and make the individual market work better.
“There are more sophisticated models that are available to us to today,” Lourey said.
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