Maine Magic

Normally, Congress can’t wait to get out of town for a recess so they can get home and press the flesh with the people, but I am sure the Republicans were especially looking forward to more town hall meetings, especially given their progress on healthcare reform.

We open the week with our sarcasm stun gun set to ‘subtle.’

So, just before the Easter break, the House floated an amendment to their American Healthcare Act (AHCA) referred to as the ‘Invisible Risk Sharing Program.’  Of all the super powers you could have, being invisible could come in handy, right?

Here is what you should know…

The concept would allow insurers in the individual market to prospectively identify people who are likely to cost a lot, then ‘cede’ their premiums to the shared risk pool (called ‘invisible’ because said ‘expensive’ individual would have their claims paid per usual and would not know they are even in this program).  The risk pool, funded by both the ceded premiums and about $15 billion from the Feds over nine years, would pay the claims, alleviating the carrier from any risk.

Here is what else you should know…

If this sounds a lot like the highly controversial ‘reinsurance’ part of ObamaCare, it is because it is.  This is a program to help cover the cost of really expensive people so the individual market doesn’t blow up, a big urgent concern right now.  The difference is this one is prospective, not retrospective.  Is that a difference with a distinction?  Maybe, maybe not.

Next, there is a little trap for providers hiding in here.  While you would ‘see’ a commercial carrier for the patient, you’d get reimbursed at Medicare rates.  How would you know?  Who knows? It’s invisible! 

Finally, beware the ‘Maine story’ being run to support this idea.

Maine implemented something similar in 2011, their high risk pool funded by a $4 per person per month tax on everyone else with insurance.  Proponents claim it cut individual premiums in half.  Half! Alchemy achieved!

However, at the same time, Maine made two other important changes to their individual market.

First, they reduced coverage requirements and upped personal financial participation.  Coverage for things like, oh say, maternity care, was dropped entirely.  Patient co-insurance increased to 30% and out-of-pocket maximums doubled. 

Second, some arcane rules around ‘age-rating bands’ provided an incentive for the older, sicker patients to stay with their existing policy rather than move to the high risk pool program.  So most of these expensive people were not included in the miraculous reinsurance program.

You think these two things might, just might, have had much impact on the ‘Premiums Cut in Half’ story?

An actuarial analysis estimates the real effect on premiums to be about the same as the ObamaCare reinsurance program, which brings us right back to the beginning.

As my stats professor said, ‘There are three types of lies – lies, damn lies, and statistics.’


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Tim Coan, ALN’s CEO, writes an insightful and witty blog three times a week about a variety of topics relevant to independent physician practices.

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