How High-Risk Pools Performed Before ACA

Wouldn’t it be great if we could point to just one thing to solve the health care/health insurance crisis in America?

In this column I have addressed multiple issues, but always come back to the fact that it is the underlying cost of care that drives health insurance premiums.

The “80/20 rule” says that 20% of the group (customers, students, volunteers…) is responsible for 80% of (income, problems, work done). In health care we see a similar principal. One study concludes that 30% of all Medicare expenditures are attributed to the 5% of beneficiaries that die each year, with much of the cost occurring in the last month of life! Speaker Paul Ryan recently referenced studies that suggest 50% of costs are attributable to 5% of the sickest patients.

These statistics are used by those who support the idea of high risk pools. This is not a new concept. Before the ACA, (Affordable Care Act, aka Obamacare) California had a high risk pool known as MRMIP (Major Risk Medical Insurance Pool). Uninsurable individuals could get on a waiting list for coverage. Premiums were about triple the standard rate.

The maximum benefit was $75,000 per year and $750,000 lifetime. The waiting lists would be a year or more depending on the experience of the pool. Funding was limited, so when the money was low the list got longer. It was better than nothing, but would cause an Individual to delay care for as long as possible in hopes they could get into the pool.

High risk pools are based on the idea that if we split the group into the “really sick” on one side and” the rest of us” on the other, rates will go down for the healthier population. But the reality is that things change. People get sick, even if they started out in the “healthy” pool. Insurance pools mature and rates need to be adjusted to cover that pool. In the long run, rates end of increasing and the results will be the same, unless you keep pulling people out of the pool when they get very sick.

As I read the proposed AHCA (American Health Care Act”, these risk pools would only be for those that had a lapse in coverage. So in reality all the sick people that are in existing pools will continue to impact that pool. IN other words, all those sick people that are already in the group will continue to effect the rates.

Clearly, better management of chronic illness and providing a graceful and dignified exit from this world are key to controlling health care costs. The ACA included enhanced reimbursement strategies for ACO’s (Accountable Care Organizations). This model rewards the provider for taking steps to better manage the health of the patient. This was a direct attempt to try to address the actual costs of care.

A former hospital executive jokingly refers to the fact that hospitals really doesn’t want patients to get well. After all if they aren’t in the hospital, the hospital has no income. There is always a bit of truth in a joke, isn’t there?

A “fee for service” model pays providers for each procedure that you receive. It doesn’t take a rocket scientist to figure out that if you “do more procedures” you make more money. Ask a cancer patient how frustrating and expensive it is to be subjected to multiple tests each time a new doctor is involved in their care or with each hospital admission.

What about that last year of life? Is it true that the more money you spend, the better quality of life? It’s America, more is better, right? Not so, in my opinion

As an insurance broker for 39 years, I have had the privilege of being involved at some of the most intimate and vulnerable moments of an individual’s life. One of the worst involved an 87 year old woman who suffered from multiple chronic conditions. She was frail, not ambulatory, clearly close to the end. When I visited her at the hospital, they told me they were prepping her for gall bladder surgery. It took all of my self-control not to cry out, “Are you crazy?”

The ACA provides payment to doctors to discuss end of life issues with patients, preferably before the situation became critical. This is a long way from creating “death panels”. Too bad my 87 year old client did not have the gift of such a discussion prior to having to endure such a brutal death.

Will the new law decline to pay physicians for this type of care? We will wait for the Senate’s proposal to find out. There is a reason the ACA was over 1000 pages. This topic is complicated!

Banarto, McClellan, Kagy and Garber, 2004*

Margaret R. Beck
Margaret Beck  CLU, ChFC, CEBS started her insurance practice in Redding in 1978. As an insurance broker/consultant,  she represents businesses and individuals as their advocate.  She assists in choosing proper products, compliance with complex benefit laws and claims issues once coverage is placed. All information in her column is provided to the best of her knowledge, subject to final regulation by the respective agencies. Questions to be answered in this column can be submitted to Beck's column is also published in the Redding Record Searchlight.
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12 Responses

  1. cheyenne says:

    While I think hospitals and doctors require more patient tests than are necessary, I also believe this is more to do with Malpractice lawsuits than patient health.  The hospitals don’t want to be sued because they didn’t do all the tests.

  2. Richard Christoph says:

    Thanks for yet another insightful and informative column.

  3. Rod says:

    “it’s the underlying cost of care that drives insurance premiums.”   Let’s see now, was it the chicken or the egg?

    Another argument is…..cost of care is driven by insurance.  The little people, the masses, try to buy affordable care and get directed to insurance as the protector of health,  slick PR directed at the most vulnerable.  Insurance is profit first and foremast, care is up to the individual’s choice.  The middleman, insurance, has zero influence on demanding their clients be healthy and live by healthy choices for an entire lifetime.  They’re Wall Street financiers who have created an exciting profit scheme.  Somebody check the financial stats, please, insurance is crippling America.

    There’s nothing affordable from insured health care.




    • K. Beck says:

      You don’t need medical insurance if you never get sick. Who wants to take that risk? Those without insurance go to the ER and we all pay when we need to go to the hospital because the hospital covers those costs by charging everyone else who can pay. Nothing is free. Welcome to the USA!

      Anyone who ends up in a hospital bed, for any reason, needs an advocate in the room with them. Aside from all the unnecessary stuff, hospitals make mistakes. My brother had to have surgery on his elbow. The person who came in the room to prep his arm, started prepping the wrong arm! My brother stopped him. Who knows if the people in the OR would have caught the mistake or just proceeded to operate on the prepped, wrong, arm.


      My Aunt, who lived to be 102, was, in effect, “a cash cow” for medical providers the last 25 years of her life.  The gall bladder operation at 87 isn’t rare and unusual.  All kinds of knee and hip replacements, surgeries, tests and tests and batteries of treatments are heaped upon those who are over 65 — even if they resist them, which my Auntie did.  She was pill-adverse, ate a Mediterranean diet (being Italian) and was a fiercely independent cuss.  Still, in the long, long run, she ended up on “mood altering” drugs for pain after a fall and slipped into a more compliant phase.  I have no idea what was spent on her during her last few months, but I’m sure she’d as soon been allowed to die and go to her peaceful rest had she been counseled about her options at 95.

  4. Rod says:

    It always makes me wonder if anybody bothers to keep-up with the cause and effect of the partnership of health insurance/big pharma.  You know, so called investors who bank-roll legal insurance of drugs.  We’ve never before seen such an overwhelming rate of addiction.

    Go ahead, read how you are the drug problem in America…………

  5. Steve Towers Steve Towers says:

    “Nobody knew that health care could be so complicated.” Donald Drumph, POTUS

    Yeah, it’s pretty damned complicated, especially when the political establishment—and particularly the right—insists on putting the insurance industry first, in the interests of protecting free enterprise.  It’s akin to insisting that the best way to improve the national transportation system is to make sure, first and foremost, that the profits of the car insurance industry are protected first.

    As a result, we pay the highest medical insurance costs in the world on a per-capita basis, in exchange for what is clearly middling-quality healthcare and outcomes, across a wide range of metrics.  The sensible solution would be to look to any one of the several superior single-payer systems in northern Europe and say, “Hey, let’s just copy what those guys are doing.  They get better medical care at a fraction of the cost.”

    But no—we can’t do that, because the free enterprise system provides the best of all possible worlds.  Professor Pangloss would be proud of us.

  6. Common Sense says:

    #45 is in Way over his head!……but then the vacations every weekend to yet another Estate for some Golf might help clear his head!

    Yes, it’s complicated…..and this Presidency thing….well….that’s a bit complicated also….yes.

    When you put the Corporations….the Health Care Companies/Special Interest Groups, and all those the helped you get elected FIRST….over the “People”… will have problems for the Average American. Unfortunately, there will be some that voted for #45 in earnest that will see Their premiums going up…but then, from what I have seen….they will double down….or by that time….triple down….”it’s going to get better….he’s our man”….I have just a couple words….single-payer…..and soon!

    It will be interesting to see what the Senate does with this pile of……Umm….paperwork…..So Today’s questions is-Will they Keep the partisan lines running deep and throw aunt betty to the insurance company Wolves with her Pre-existing conditions….or actually do something that might help people?..

    I see California is talking about their own Single Payer system…..should be interesting…..

  7. Steve Murray says:

    Nice article, very informative about an arcane subject. I know Canada has single payer health care and has fewer people than California. Seems to work there, should work here too. We can only hope to leave the Feds in the dust and go our own way.

  8. cheyenne says:

    In the Cheyenne news the city of Cheyenne is looking at a 40% cost increase in their health insurance with less coverage.  The reason is that the city was insured through Win Health who had negotiated with the local hospital for discounts.  Win Health provided better coverage at less cost than other insurers.  The downfall was when Win Health joined the ACA to receive all that federal money to offset risk costs.  The ACA only paid 12% of the risk costs which forced Win Health into bankruptcy and left Wyoming with only one ACA provider, Anthem.  The ACA killed a good health provider.

  9. Here’s a concise explanation on how the repeal process could play out

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