High-risk pool coverage is costly

With all the recent troubles in Minnesota's individual health insurance market, some have questioned whether consumers might be better off under the state's old high-risk pool system.

Answering the question is complicated, but a new state report suggests that premiums under the old high-risk pool would be much higher today than what individuals are paying out-of-pocket for coverage in employer plans and for certain policies under the federal Affordable Care Act.

The high-risk pool was called the Minnesota Comprehensive Health Association (MCHA). It was the state's option for people who were denied coverage by a health insurer due to pre-existing health problems.

Up until 2014, those exclusions were a feature in the individual market, which serves less than 5 percent of state residents -- primarily people under age 65 who are self-employed or don't get job-based coverage.

The new report, which was published in July by the Minnesota Department of Health's Health Economics Program, projected premiums for MCHA policies if the high-risk pool was still operating in 2017. It found that a 40-year-old consumer in Morris, Minn., would be paying approximately $5,928 in high-risk pool premiums this year, or about $1,000 more than the current cost of a bronze plan for a 40-year-old in that part of the state.

The out-of-pocket premium cost of MCHA coverage would be "over four times as much as the average premium paid by employees for employer-sponsored coverage," the report added.

A return to high-risk pools has been suggested as part of Republican plans to repeal and replace the Affordable Care Act (ACA). The new report is not meant to pass judgment on any such ideas, but simply to underscore how high-risk pools require significant subsidies, said Stefan Gildemeister, the state's health economist.

The report shows that MCHA coverage for a 40-year-old in Morris would require not just the relatively high out-of-pocket premium cost from enrollees, but also a significant subsidy of $9,458. When the high-risk pool operated in Minnesota, subsidies were provided by health plans that passed the cost on to certain employer groups and individual health plans.

The report did not address the quality of doctor and hospital networks with coverage under the high-risk pool versus health plans available under the ACA. One of the virtues of the old MCHA system was the broad access it provided to doctors and hospitals, including the Mayo Clinic.

"The key message is maybe to just remember that providing coverage for people with pre-existing conditions is not cheap," Gildemeister said in an interview. "Whatever the design is to cover people with complex conditions, it's going to be costly and it needs to be well organized."