How To Replace Obamacare

As Washington Republicans – in the administration of soon-to-be President Donald Trump and in Congress – scramble to replace the Affordable Care Act (ACA), some Wisconsin officials offer this advice: Consider Wisconsin’s plan that has offered the state’s sickest residents health insurance for more than 30 years.

Wisconsin’s Health Insurance Risk-Sharing Plan (HIRSP) helped those who could not buy health insurance because of pre-existing conditions, or who had lost health insurance that had been available through their employer. It was one of about 30 high-risk health insurance “pools” run by states. It was approved by a Democratic-controlled legislature and signed into law by Republican Gov. Lee Dreyfus in 1979.

Wisconsin’s HIRSP “survived and thrived” as a national model before the ACA ended it, says Joe Kachelski, former chairman, vice chairman and member of the board that ran it.

“Wisconsin had one of the largest high-risk pools in the nation,” adds Sean Dilweg, state insurance commissioner from 2007 until 2011. “There were no (tax funds) used to run HIRSP. It was financed through premiums, assessments on health insurers and reduced payments to health service providers.”

Now CEO of the Statewide Health Information Network Inc., Kachelski says Congress may consider high-risk pools “as an alternative mechanism” to the ACA’s requirement that individuals must be allowed to buy health insurance.

Dilweg, now a vice president of Mortgage Guaranty Insurance Corp., also explains why Wisconsin’s HIRSP could play an important role in the after-the-ACA national debate:

“The advantage of a high-risk pool occurs when private insurance companies can deny coverage based on an individual’s pre-existing condition. As the ACA is repealed, this requirement would be as well.

“High-risk pools are a key tool in bringing an insurance market back into balance following (ACA) repeal and providing individuals and families with severe conditions insurance coverage.”

A Legislative Fiscal Bureau (LFB) summary said HIRSP had a record 21,770 enrollees in 2012. After that, HIRSP had no “reason to exist,” Kachelski notes, as Obamacare came into place.

LFB reported that 94 percent of enrollees in 2012 got health insurance from one of five HIRSP plans, which varied greatly by deductibles and premiums. Enrollees could pick a “low-deductible, high-premium” or a “high-deductible, low-premium” plan – much like choices through the ACA.

According to the LFB, individuals who qualified for HIRSP had maximum annual individual out-of-pocket costs that varied from $2,000 to $8,500 – out-of-pocket costs that would seem reasonable to some middle-class Americans today.

Monthly HIRSP premiums also varied widely, depending on deductibles and premiums chosen. For example, monthly premiums for HIRSP plans ranged from $158 for someone under age 18 to $1,500 for a male over age 60, the LFB reported. And, HIRSP premiums went up or down by as much as 15 percent per year.

Still, Kachelski says, “Wisconsin’s experience in running a high-risk pool showed that ‘high risk’ does not necessarily mean high cost for every enrollee, every year.”

And, like the ACA, coverage under HIRSP required subsidies for low-income participants – about one in four enrollees in 2012. Then, households with incomes of less than $34,000 qualified for subsidies.

HIRSP differed from the ACA in one major way. It had a $2-million limit on medical costs for individuals; the ACA removed all coverage caps.

Kachelski said HIRSP had to be reworked three times to survive.

*Until  the early-1990s, HIRSP “deficits soared” because politicians – the governor and Legislature – set rates annually. HIRSP then went to more a fiscally sound “actuarial process” that required premiums to pay 60 percent of costs and assessments on health insurers 40 percent.

“No risk pool can function in the long term if the mechanism used to determine premium rates does not adequately account for program costs,” Kachelski warned.

In the late-1990s, the funding formula had to be changed to 60 percent from premiums, 20 percent through assessments on health insurers, and 20 percent through discounts in reimbursements to providers.

“Equitable allocation of costs is crucial,” Kachelski said. “There is also a ‘public good’ component to providing coverage to high-risk individuals, and some level of public funding would seem reasonable.”

In 2005, HIRSP became a public authority, giving it more control over its future.

“To the extent possible, a high-risk pool should be operated as an insurance company and not as a government program,” Kachelski adds.

Kachelski also said states should run their own pools. “Each state and market is different.”

As Republican leaders in Washington write the nation’s health-care future, Wisconsin’s HIRSP could be a forerunner — or a footnote.

Steven Walters is a senior producer for the nonprofit public affairs channel WisconsinEye. Contact him at stevenscwalters@gmail.com