Vance's Critics Wrong: No Need to Fear High-Risk Pools

(Editor's Note: The following opinion column does not constitute an endorsement of any political party or candidate on the part of Newsmax.)

Following the recent vice-presidential debate, Sen. J.D. Vance, R-Ohio, continues to face attacks on his ideas for covering people with pre-existing conditions.

Vance's critics call his proposal — which would separate out sicker patients into a separate high-risk insurance pool — inhumane and impractical.

As Arthur Caplan, the head of medical ethics at NYU Grossman School of Medicine told NBC News, "Anything that separates out pre-existing conditions is doomed to utter failure."

There's plenty of evidence to suggest otherwise.

First, some background:

Under the current system, there's a single risk pool in the individual market.

Beneficiaries of the same age in the same area pay the same premiums to their insurer, usually with substantial government aid.

Health status or history or gender have no bearing on someone's premiums.

Health plans pay out claims from that pool of premiums.

The problem with this arrangement is that a small number of high-risk individuals typically account for the lion's share of medical expenses in a given year. In fact, 5% of patients were responsible for nearly half of all health spending in 2021.

To guard against the possibility that insurers might try to avoid people with substantial health risks, Obamacare employs a risk-adjustment program that redistributes money from insurers with lower-risk enrollees to those with higher-risk ones.

This structure means the majority of healthier patients tend to overpay for coverage in order to defray the costs of a small minority of high-risk individuals.

Vance has a different idea.

Under his plan, patients with significant health risks would belong to their own high-risk pool, which would be heavily subsidized by taxpayers. The much larger population of healthier patients, meanwhile, would be in a traditional risk pool.

Since this larger, healthier pool would no longer include people with substantial risk of high claims costs, its overall health expenses would decline. As a result, premiums for individuals in this pool would plummet.

This separate risk-pool approach or something close to it — has worked in the past.

The recent experience of states that made short-term, limited-duration plans available for up to a year — and renewable for up to three — thanks to a Trump-era executive order is instructive.

These plans are not subject to Obamacare's rules and mandates.

Short-term plans can deny coverage and set premiums in line with a person's health status.

But as a result, they can be more affordable than exchange plans.

The 2018 Trump executive order made them a viable alternative to exchange coverage for healthy people — for example, college students who may need coverage when they're away from school for a semester or the summer, or people between jobs.

Obamacare's defenders predicted that short-term plans would draw people out of the exchanges and put the marketplaces' health at risk.

So what happened?

According to research from the Paragon Health Institute, individual market enrollment actually increased in states friendly to short-term plans between 2018 and 2022 — and decreased in unfriendly states.

Premiums also declined in states friendly to short-term plans between 2018 and 2023; they increased in unfriendly states.

What gives?

The Paragon paper posits that additional competition from short-term plans may have forced exchange plans to improve their offerings to attract customers.

Short-term plans may also have absorbed some claims that the exchange plans otherwise would've had to cover. And that may have kept the exchange pool's overall claims costs down.

Democratic vice-presidential candidate Tim Walz's home state of Minnesota offers up another example of how separate risk pools can work.

Under a waiver granted by the Trump administration in 2017, the state subsidized the cost of insuring high-risk patients once an individual's claims exceeded a certain limit.

The goal was to lower premiums throughout the state's individual market. It worked. According to a federal report on the program from 2021, "Minnesota's waiver was associated with lower premiums across all plans offered in the marketplace."

This is similar to Vance's high-risk pool proposal. Yet his critics insist that he wants to leave patients with pre-existing conditions to fend for themselves.

They're wrong. Vance's approach would direct federal support at the small population of patients who truly need it — while enabling the rest of the market to function more efficiently, more affordably, and more sustainably.

Sally C. Pipes is president, CEO, and the Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is "False Premise, False Promise: The Disastrous Reality of Medicare for All," (Encounter Books 2020). Follow her on Twitter @sallypipes. Read Sally Pipes' Reports — More Here.