Invisible Risk-Sharing Program Will Lower Premiums and Help Those With Pre-Existing Conditions

Text updated to reflect the timing of the release of original research on this amendment. The release is scheduled for Friday, April 7.

Washington, D.C. — Earlier today Speaker Paul Ryan announced the Palmer-Schweikert amendment to the American Health Care Act, creating a federal invisible risk-sharing program that addresses two key priorities of the repeal and replace process – lowering the cost of health insurance premiums for millions of Americans and ensuring individuals with pre-existing conditions maintain access to coverage.

A risk-sharing program identifies the handful of pre-existing conditions driving premium increases and sets up a targeted program that allows insurers to price new enrollees as if all are healthy instead of pricing everyone as sick.

The Foundation for Government Accountability believes that if Congress enacted an invisible risk-sharing program and expanded age bands to 5:1, Americans would see lower costs and greater access to coverage.

FGA concludes that an invisible risk-sharing program would result in:

  • Lower premiums for all ages
  • Coverage for those with pre-existing conditions
  • Fewer uninsured Americans

“Lower premiums and access for the sick. We can do both. The invisible risk sharing program lowers premiums for everyone who gets insurance outside their employer and outside the ACA exchange, while still providing access and those same lower premiums to those with pre-existing conditions,” said Tarren Bragdon, CEO of the Foundation for Government Accountability.

Invisible risk-sharing programs are not a new idea. Last month, FGA detailed Maine’s approach to tackling many of the same challenges Congress faces today. By implementing an invisible risk-sharing program and relaxing premium rating bands, Maine saw significantly lower premiums without those with pre-existing conditions losing coverage.

“Thanks to these reforms, individuals in Maine saw an average annual premium savings of $5,500 with rates as much as 70% lower than existing plans,” said Josh Archambault, FGA Senior Fellow. “The high-risk pools led to more young people entering the market and even savings for those with pre-existing conditions.”

How an Invisible Risk-Sharing Program Works

  1. All applicants buying insurance on their own fill out a health statement. The program would have specific conditions (i.e. what most people call pre-existing conditions) identified in a state or region that are driving premiums up the most. Those conditions would automatically trigger a designation for that enrollee to the program.
  2. Enrollees are enrolled in the same plans at the same rates, regardless of whether they are designated for the invisible risk-sharing program. In fact, enrollees have no idea that they are being designated for the program.
  3. Insurers transfer most premium dollars paid by those designated into the program. The insurer also remains responsible for a set amount of claims, before program assistance kicks in for insurers. These provisions prevent insurers from gaming the system by removing the opportunity to profit off individuals placed in the program.
  4. Claims for those with pre-existing conditions are reimbursed out of the program funds once they have exceeded a threshold. Claims are reimbursed at Medicare rates to ensure that program dollars are stretched as far as possible.

The Foundation for Government Accountability is a nonprofit, multistate think tank that specializes in health care, welfare, and regulatory reform. To learn more, visit TheFGA.org.

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