There has been some discussions about invisible high-risk pools. That is a condition where the state assumes responsibility for some subset of sick enrollees’ high claims cost. For instance, Alaska began subsidizing the cost for a few individuals so the remaining 25,000 Alaska Obamacare enrollees would not be priced out of the market.
The state is trying to stop the adverse selection death spiral where healthy folks drop coverage and flee the high premiums caused by the small number of very sick individuals. Maine also used a form of invisible risk pools when it began transitioning away from a strict community-rating / guaranteed issue requirements in 2011, that about destroyed its individual health insurance market.
The following excerpt is from Health Affairs Blog:
Maine’s Fix: An Invisible High-Risk Pool and Expanded Age Band Reforms
In 2011, Maine enacted major changes to address its struggling insurance market. Public Law 90 was designed to improve the market using free-market principles and the lessons learned are important for policymakers as they work to unwind the ACA and reshape insurance regulations.
The first thing Maine did was establish an invisible high-risk pool for individual insurance applicants with pre-existing conditions. In practice, it functioned like a hybrid of a reinsurance program and a high-risk pool. It operated like a reinsurance program in that it helped cover claim costs for individuals with high medical claims in the market. It operated like a high-risk pool in that it only targeted a subset of individuals based on specific conditions. However, unlike “traditional” high-risk pools Maine’s program did not remove individuals with pre-existing conditions out of the traditional market or charge them higher premiums.
Secondly, the state expanded rating bands from 1.5-to-1 to 3-to-1, the maximum allowed under the ACA. (Unfortunately, further changes were not possible within the framework of the ACA.)
It was the combination of these reforms—an invisible high-risk pool and expanded age rating bands—that produced positive results by lowering premiums and attracting younger and healthier people to purchase insurance.
It is important to note that lower premiums were not the result of changes to existing requirements that insurers offer coverage year-round to anyone regardless of health status, prohibitions of rating premiums based on health status or sex, or changes to any required benefit mandates.
This experiment illustrates that Republicans have numerous tools and states have many ways to experiment to make their insurance markets less dysfunctional. I have talked to numerous people who have dropped their coverage (withholding, say, $4,000, $5,000 or $6,000 from the risk pool) because they believe paying that much for a health plan that covers none of their medical bills is a sham.
The results in Maine were that young peoples’ premiums fell by about $5,000, while those much older saw their premiums fall even more.