Making Private Insurance Work: The Role of Invisible Risk-Pools or Reinsurance in Reforming the Affordable Care Act or in a Replacement

June 22, 2017

Making Private Insurance Work:

The Role of Invisible Risk-Pools or Reinsurance in Reforming the Affordable Care Act or in a Replacement


Dave Wells, Ph.D., Research Director


The Republican Senate Healthcare Reform bill crafted behind closed doors is supposed to be revealed today.  One concern impacting Arizona would be any reduction in federal support for Medicaid (AHCCCS) as that would pose grave budgetary challenges for the state as well as imperil health coverage for 400,000 Arizonans—both childless adults below the poverty line whose coverage was reinstated after Arizona expanded Medicaid (317,135 enrolled) as well as the expansion adult population (82,228 enrolled).  GCI will have a blog out detailing that aspect once the bill is released. (see AHCCCS June 1: Population Report

However, for nearly 200,000 Arizonans, their care comes from the private healthcare exchange and anyone losing Medicaid coverage as a consequence of any new action by Congress signed by the President would fall into the private marketplace (see

As such, it makes sense to explore one key policy fix that would vastly improve the Affordable Care Act and is absolutely necessary to make any Republican alternative have any chance of being a functional replacement. The policy fix is adding invisible high-risk pools to either the Affordable Care Act (ACA) or any effort to replace it. Alternatively, reinsurance could be done to accomplish the same end.  Both are invisible means of trying to cap exposure to insurance companies and lower premiums.

June 21st (yesterday) was the deadline for insurance companies to submit applications to provide coverage in the private market exchanges for next year, though, as was the case in Arizona last year, late applications may still come in for areas not covered.  Based on analysis by the Washington Post, for 2018 Arizona’s Healthcare Insurance Exchanges under the Affordable Care Act will continue but premiums may be rising up to 20 percent because of issues with the Trump Administration’s enforcement of the ACA.  Like this year every county in Arizona will continue to be served by a lone insurer except Pima which will be served by two.

Properly funded invisible high-risk pools have the ability of bringing in additional insurers into these markets as well as lower premium costs before subsidies.  They are a means where people buy into insurance markets just like everyone else at community-pricing based on age bands, but in the case looked at here based on medical histories the top ten percent of enrollees with the highest anticipated health costs would have their cost to insurance companies capped with government providing the remainder of the cost of their care. While the House American Health Care Act (AHCA) included these risk pools, they were insufficiently funded.  The Affordable Care Act used instead a reinsurance system that reimbursed insurers for any enrollees whose costs were above $45,000 (  However, that program ended in 2016, which coincided with many companies leaving the marketplace and rates rising substantially.