Federal Invisible Risk Sharing Program. Is this a smart amendment to the American Healthcare Act? It may be, let’s discuss and see!

The Federal Invisible Risk Sharing Program (FIRSP) appears, at first read, to have provisions that would allow insurers to reduce premiums from current levels and keep them lower in years to come. It lacks some detail that the Secretary “shall” determine but let’s discuss what it could provide. BTW, is it interesting to you that when the Government offers to reinsure the plan they call it “invisible”? Just wondering, that’s all.

The FIRSP amendment Sec. 2205, at its core, would establish a stop loss level for insurers offering health insurance products in the Individual market. The stop loss coverage would reimburse an insurer for claim costs exceeding $1,000,000 on any individual. It would act as re-insurance for insurers so that insurers could set premiums knowing that claim costs for individuals above $1M and costs for members with certain health conditions likely to exceed $1M could be passed off to the “government’s” high risk pool. It would tend to lower and contain premiums as the insurer would not be subjected to claims associated with catastrophic illness or accidents.

This should make pricing plans easier for insurers because, pre-ACA, insurers would often purchase reinsurance for their products to pass off  a portion of their risk, above a certain threshold. Insurers are familiar with the costs associated in these reinsurance arrangements which should help as they negotiate with the government’s actuaries on pricing.

The amendment states that a portion of the premium collected by insurers would go to the government’s pool to cover the government’s risk of paying for claims above $1M. The percentage that a plan will pay to access this reinsurance will need to be determined but it will give the government a taste of what insurers faced trying to price plans with unlimited lifetime maximum benefits. Pre-ACA insurer’s plans would have lifetime limits ranging from $2M to $6M depending on the region. That’s one reason the ACA’s unlimited lifetime benefit was so scary to offer for insurers.

What about the GROUP MARKET
Initially, it appears that FIRSP does not apply to employer sponsored plans in what’s referred to as the group market. The group market has traditionally been divided into 2 or 3 group sizes; small group (2-50EEs), mid-size (51-100EEs) and large employers having 100+ employees.  I would suggest that FIRSP is shortsighted if it only covers individual market and should be expanded. The average size of employers in the small group market is under eight (8) employees per group but employers with less than three (3) employees is common.

The FIRSP would help keep the premiums lower and stable in this market segment and therefore should be included. Of course actions to help in this market segment could cause employers to purchase their coverage directly from insurers and stay away from their state-run exchanges.

If FIRSP does not accommodate the group market then it would lead one to believe that the authors are not supportive of the small group market. That would lead one to believe that it is just a ploy to take a step closer toward single payer because the government would still be controlling the strings.

To include the small group market in FIRSP the reinsurance stop loss level could be increased above the $1M in the individual market and could be negotiated based on region of the country, size of insurer, PPO vs HMO and so forth. Again, a one size fits all approach does not need to apply.

The first draft of FIRSP leaves much to the states which is the Republican narrative these days but also suggests someone is saying “I don’t want to deal with it”. Leaving decisions to the states could be problematic for large populations like those in California or New York. It would be easy for the Feds to establish the means and manner in which reinsurance claims could be paid and thus avoid the liberal minded states tendencies toward single payer. Heck, let a good TPA handle it for the Feds and problem solved.

Your author thinks that FIRSP makes sense but at this point it is just a band aid on the overall flawed AHCA. Any amendment, all by its lonesome, is like a bolt-on accessory for your crappy car. If your car engine does not run then bolting on fog lights and flashy decals won’t help much.
Sorry for over using the metaphors.

But, what do you think? Let me know.
And remember, we are all in this together.

Mark Reynolds, RHU
559-250-2000
mark@reynolds.wtf

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