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Study: The Federal Invisible High-Risk Pool

The Federal Invisible High Risk Pool (FIHRP) is a proposed risk sharing/transfer mechanism to cover certain high-cost claimants in the individual health insurance market that also facilitates coverage for those with pre-existing conditions. Introduced as an amendment to the American Health Care Act of 2017 (AHCA), the FIHRP creates a high risk pool that covers claims for persons whose insured plan benefits exceed $10,000 per year; those healthcare providers are paid at a lower rate than what commercial carriers typically negotiate. The FIHRP is funded by a combination of carrier premium contributions along with proceeds from the Patient and State Stability Fund (PSSF).

This paper addresses the following:

  • The effect of a FIHRP on premiums in the individual insurance marketplace
  • The cost of the program including how much PSSF or other funds would be needed to supplement the 90% of the policy premium that is paid to the FIHRP
  • Individual insurance enrollment, including those maintaining their coverage and uninsured persons becoming insured, compared to enrollment levels without the FIHRP
  • The effect that the rate reduction attributed to the FIHRP has on the rates by age if the 3:1 age curve is replaced by a 5:1 age curve

As requested by The Foundation for Government Accountability (FGA), we evaluated the effect of the FIHRP under two scenarios. The first scenario assumes that the persons insured under the existing ACA marketplace can remain in their current plans, with their current rating mechanisms, rate subsidies, and that a new program is created that can be priced to the expected healthcare costs of the persons enrolling in that program, with no risk adjustment between this new program and the existing risk pool.

This initial scenario was reviewed first assuming the original ACA risk pool would not benefit from a FIHRP, and second assuming that the original risk pool would benefit from a FIHRP. Throughout our analysis, we assumed that all of the existing ACA rules continue to apply, including but not limited to guaranteed issue, pre-existing condition exclusions, and the individual mandate. If any of these provisions were to change in any way, the results in this report will be different.

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