It happens so often now that it has stopped being remarkable: another health insurance company leaves the Obamacare exchange. Near the end of May, Blue Cross and Blue Shield of Kansas City announced it would be exiting the Missouri and Kansas exchanges, causing 67,000 people to lose coverage. That will likely leave people in 25 Missouri counties without an insurer in the individual market.
There is an opportunity here for congressional Republicans, one that could both bridge the gap between moderates and conservatives over Obamacare repeal and give them a big boost going into the 2018 election.
The moderates in the GOP want to keep Obamacare’s protection for preexisting conditions. It is an understandable position, as protecting people with preexisting conditions is compassionate, and it does not make for good press to have some of the sickest people lose insurance.
More conservative Republicans would rather repeal every last piece of Obamacare, including the protections for preexisting conditions. That, too, is an understandable position, since those “protections” are a major cause of the Obamacare exchanges’ death spiral. It is why insurers are exiting the exchanges and thousands of consumers are losing their insurance.
Republicans can bridge that gap with what can be called the Federal Consumer-Based High Risk Pool (FCBHRP). Here’s how it would work:
- The legislation to repeal and replace Obamacare establishes the FCBHRP, a high-risk pool for anyone who has coverage on an Obamacare exchange by Dec. 31, 2018, and subsequently loses that coverage because the insurer providing it leaves the exchange.
- Consumers who lose their insurance on the exchange and join the FCBHRP will receive exactly the same benefits they received under their exchange policy. They will pay the exact same premiums they paid on the exchange. A consumer who had received a premium subsidy on the exchange and subsequently joined the FCBHRP would pay a premium equal to the premium he paid on the exchange after the subsidy was applied. Each year, those premiums would be increased by the rate of inflation.
- Individuals and families who are not considered “high risk” can remain on the FCBHRP until there are at least two health insurance companies selling coverage in the county in which they reside. Those who reside in a county that already has two insurance companies will be able to stay on the FCBHRP for a maximum of two years.
- High risk individuals and families can remain on the FCBHRP until they reach Medicare age. After two years their coverage will change so that they will be offered lump-sum payments (let’s call them Health Treatment Accounts, or HTAs) they can use to pay for treatment. The amount in the HTAs will be based on the average cost for treatment in the area where the individual or family lives. For example, let’s say an individual on the FCBHRP has kidney disease for which he receives dialysis. The average cost for treatment is $40,000 annually in his area. Thus, he receives $40,000 in an HTA each year to pay for his treatment. As added incentives to keep costs down, a consumer will be able to keep a small percentage of any money in the HTA he doesn’t spend; conversely, he will be required to pay a small percentage of any expenses that exceed the amount of the HTA. The consumer behavior that the HTAs will unleash will help keep costs down for the FCBHRP.
HTAs are similar to a concept known as “reference pricing.” When reference pricing was used for hip and knee replacements in California, costs dropped by over one-third. For a bibliography on reference pricing, go here.
The FCBHRP offers moderate Republicans the chance to credibly go before voters and say that they have helped those who are losing insurance on the Obamacare exchanges and have preexisting conditions. It offers conservative Republicans a way to say that they offered such help in a way that keeps costs down and promotes markets in health care.
Finally, the FCBHRP offers the entire GOP a way to use the Obamacare death spiral to their advantage. By including the FCBHRP in their health care overhaul, congressional Republicans can argue that passing health care legislation is the only way to help people who are struggling because Obamacare exchanges are imploding. They can say the bill to repeal and replace Obamacare will provide timely assistance to the 67,000 people in Missouri or the 70,000 in Iowa who will lose their insurance at the end of this year.
And if Senate Republicans were truly crafty, they would offer the FCBHRP as an amendment to their health care legislation and dare the Democrats to vote against it. Imagine a Senate Democrat running for reelection in 2018 in a state where people are losing their exchange policies. If said Democrat were dumb enough to vote against FCBHRP, the Republican challenger would have a potent issue to exploit.