Press reports coming from Internet news sources proclaim that many Senate GOPs are not hopeful about Healthcare Reform in 2017. In spite of those reports, let’s look at one issue that may hold promise. That being the Federal Invisible Risk-sharing Program.

The Federal Invisible Risk-sharing Program has been talked about by many as a tool to help hold down premiums in a future that includes AHCA 2.0. Usually pundits and authors refer to reinsurance as applying only to high risk pools that were implemented by several states to help provide coverage for the high costs associated with many insured’s. Maine, for example, has a re-insurance program that is often cited as a risk sharing program that acts like true re-insurance for insurers and available to help insurers cover the sickest or most costly members in Maine’s covered population.

Maine’s re-insurance program steps in to reimburse insurers on a sliding scale, if a member, previously declared as high risk under the program guidelines, has claims exceed a certain threshold which was set at $7,500. Then the Re-insurance association (pool) reimburses the insurer 90% of the claim cost until the claims exceed $32,500. At that point the re-insurance association reimburses the insurer 100%.

In Maine’s program the insurer would cede (pay) to the state’s re-insurance program up to 90% of the premium collected for the designated member. Maine has guidelines for designating a member both at initial enrollment as well as at later  times plus rules for members coming and going or changing plans. It is a mechanism that is administered much like what insurers experience in typical reinsurance programs available today.

The key objective is to provide a mechanism by which insurers can reduce what they would otherwise establish as their base rates in a guarantee issue, no pre-ex, and no real penalty for not signing up environment. It makes sense since insurers will be able to actuarially determine what its rates should be without the fear of one or two members killing (sorry for the pun) their actuarial assumptions.

It could be argued that Maine, while implementing a reasonable solution, set its attachment point (the $7,500 figure) to low. But given the potential covered enrollment, based on Maine’s overall population, that figure does make pretty good sense, too.

Insurers are quite familiar with re-insurance as many, if not most, re-insure their own plans. The attachment points when appropriate might be set considerably higher, such as $100,000 to $250,000 or even $500,000, for the larger carriers, the “big boys” in the market, such as the BUCAs.

This re-insurance model might be more appropriate than what many states use as “substandard or high risk pools” because in those models every covered member is charged more thereby increasing premiums for all. Also those models often provide different benefits for members covered in the high risk pool than what other members might enjoy.

The Maine model helps an insurer keep rates lower because it can set its rates for every member with the knowledge that the claim cost for high risk individuals would be ceded off to the Federal Invisible Risk-sharing Program. Plus, those members, whose claim cost is ceded off, will enjoy the same benefits as those not ceded off because they remain in the same plan as healthy members.

After all, isn’t the main objective of AHCA 2.0 suppose to be: bring down premiums and improve benefits?

So, the FIRSP could potentially lower premiums and improve benefits for more people. It would also allow more insurers to take the risk of offering plans and thus increase competition for the “big boys”. For example, a smaller regional insurer might negotiate a lower more appropriate attachment point than a BUCA but in the end still provide competition and more plan choices for citizens.

One final thought, which is out of my normal comfort zone, is how do we get people to enroll and make any healthcare reform solution equitable to  all including insurers? At least give the insurers a fighting chance to offer good plans and be profitable at the same time. It needs to be addressed either through meaningful penalties or, by my preference, of reasonable Pre-ex provisions.

Normally I would be against the Play or Pay mandates but I am “evolving” on this mater. If we set up mechanisms, methodology and rules by which insurers, providers, TPAs, brokers and the government must comply; is it wrong to set up a rule for our citizens?

Granted by all is the fact that the penalties for no coverage under the ACA were not effective and actually laughable. So, if we build a better system to provide benefits at lower premiums it should be worth while to consider either reasonable pre-ex provisions to protect insurers from those who would game the system or by mandating coverage but with meaningful consequences.

Here is a quick starting point idea for penalties:
* Individuals – Income $20,000 to $75,000 = 5%/income or $3,000 which ever greater
* Individuals – Income $75,001 to $150,000 = 5%/income or $6,000 which ever greater
* Businesses  – $2,500 penalty for 10 to 24 FTEs
Businesses – $5,000 penalty for 25 FTEs or greater

As I stated above, I am more open to this idea than before and I am not one to normally support government mandates. You have read in previous posts my opinion on addressing pre-ex. But, I also think that the past 3 years have provided proof that at least 10% of our population just won’t sign up so the consequences must be real.

Though not related, I think everyone should also pay a share of their income in Federal income tax. If one makes $5,000 or $250,000 we all should put something into the kiddy. If the folks in the lowest income levels were to pay a 5% tax then they would be more concerned about the decisions made by politicians on their behalf and maybe more engaged in the process.
Just a thought!

So, that’s the current position on the Federal Invisible Risk-sharing Program and how it may just be a good provision to support the overall goal of better coverage at lower cost.

Let me know what you think because we’re all in this together!
Until next week.

Mark Reynolds, RHU



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