Pool Party

The GOP’s love for high-risk pools shows it isn’t serious about health reform.

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Republicans are nervous about attending President Obama’s televised health care reform summit, set for Feb. 25. They sense (correctly) that the goal is to assign them blame for the bill’s failure. Perhaps they should ask themselves why this is so easy to do. The answer is that they have put forth no plausible alternative. The only official GOP plan (text, summary) was cobbled together by House Minority Leader John Boehner, R-Ohio, shortly before the House passed its version of Obamacare. Its central idea is high-risk pools. “Both parties favor subsidized high-risk pools to enable people with pre-existing conditions to get affordable coverage,” Betsy McCaughey wrote in the Wall Street Journal on Feb. 16.

As is so often the case with McCaughey, that’s a little misleading. Democrats favor subsidized high-risk pools as a temporary measure until the legislation assembles its “three-legged stool.” (To review: an “individual mandate” requiring that everyone purchase health insurance; a prohibition against insurers rejecting customers based on pre-existing conditions; and government-subsidized private health insurance, newly available through government-established exchanges.) Obamacare’s stopgap risk pools would expire in 2013 under the House-passed bill and in 2014 under the Senate-passed bill. The GOP plan, on the other hand, favors subsidized high-risk pools as a substitute for the three-legged stool. It provides no individual mandate, no protection for people with pre-existing conditions (a reform favored by 80 percent of the population, according to a recent Washington Post-ABC News poll), and no subsidized exchanges. (A much-discussed alternative proposal offered by Rep. Paul Ryan, R-Wis., provides exchanges but also eliminates Medicare, which minimizes its appeal even to Republicans. Ryan would also like to expand risk pools.)

Health reforms favored by Republicans tend to accelerate the market’s natural tendency to segregate healthy people from sick people, thereby lowering insurance premiums for the healthy majority while raising them sky-high for the sick minority. That’s true of the GOP scheme to sell health insurance across state lines (which, because insurance is regulated at the state level, would cause companies to stampede to states offering the fewest protections to the sick). It’s also true of the GOP’s urge to expand choice-oriented health savings accounts (which allow healthy people to minimize contributions). These are both features of the Boehner bill. Nowhere, though, is the GOP’s screw-the-sick bias more naked and obvious than in its passion for risk pools.

It’s an idiotic idea on its face. Create a special government-sponsored insurance pool consisting entirely of people who don’t qualify for a private insurance policy because they’re too likely to need medical attention. Have them share the risk, on the theory that, hey, at least they probably won’t all need medical attention at exactly the same time. To sustain the pool, it is necessary to set premiums and deductibles very high (risk-pool premiums are typically 125 percent to 200 percent of market rate) and to provide government subsidies. Unlike Obamacare’s health exchanges, the high-risk pools do not come attached to an individual mandate, so there’s no possibility of mingling those who can’t get health insurance with the larger cohort of people who choose not to get health insurance because they’re young and healthy. As a result, the high-risk pools are, per capita, much more expensive. But since the expense falls largely on those who are insured, it is largely invisible.

This last feature explains why high-risk pools are the health reform most commonly embraced by cash-strapped state governments. Thirty-four states operate them, serving (a relatively scant) 200,000 people, according to a January report by the Kaiser Family Foundation. Under the Health Insurance Portability and Accountability Act, a sort of health-reform-lite passed in 1996 after Hillarycare’s demise, states are required to make sure that people who leave group plans with pre-existing conditions are subsequently able to get health insurance. Twenty-eight states use high-risk pools to meet this requirement. Nearly all the states that have high-risk pools impose a waiting period, usually six to 12 months, to weed out applicants who might otherwise enter the risk pools only when their need for treatment is urgent and imminent. Although this tackles the “free rider” problem, it ignores the reality that a high proportion of applicants, by definition, will require treatment sooner rather than later. Some states (notably California) also impose “enrollment caps” when they run out of cash to subsidize the risk pool.

Last week I wrote about how BlueCross BlueShield of Texas went about denying health coverage to the uninsured based on pre-existing conditions. Some readers rebuked me for failing to point out that if you didn’t qualify for private nongroup coverage you could still get coverage through the state’s high-risk pool. Point taken. But as Time’s Karen Tumulty discovered two years ago when her brother Patrick’s kidneys started failing, in Texas (population: 24 million; high-risk-pool enrollment: 26,000) the state risk pool charges premiums at twice the market rate. Deductibles range from $1,000 to $7,500.

The GOP bill would curb some of the existing state risk pools’ harshest features. Premiums would be limited to 150 percent of the market rate, and waiting periods would be eliminated. (Insurers would likely take up the slack by raising deductibles and co-pays.) But the bill would do almost nothing to address the underlying problem, which is that 45 million people in the United States lack health insurance. Obamacare would reduce that by 31 million to 36 million. The GOP bill would reduce it by … 3 million, according to the Congressional Budget Office.

Boehner’s counterpart, Senate Minority Leader Mitch McConnell, never introduced a health reform bill of his own. Looking over the Boehner bill, one begins to see why.

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