Can High Risk Pools provide a better healthcare alternative to the ACA ?
https://www.usatoday.com/story/news/politics/2017/05/04/fact-check-pre-existing-conditions-debate/101283530/
In this political climate, the Republican party has been striving to end the ACA and replace it with a more market-oriented solution to America’s long lasting health issue: how to provide affordable care to the as most people as possible. One of the current proposals by Republicans to replace the current health care law is to create a high-risk pool for those with pre-existing conditions. What is a high-risk pool? It is a program designed for people with pre-existing medical conditions who are seeking health care coverage who are denied coverage or charged higher prices that they could not otherwise afford, the government provides subsidies to the insurers so that the person would be charged a more reasonable price.
The government would provide subsidies to insurers who gave coverage to these individuals to help cover the higher costs. How does this bring health costs down and why do Republicans think that this is better than the current healthcare law (the ACA)?
The reasoning behind this can be explained using concepts learned in class. The health care market can be described as one with two types of buyers of insurance, low-risk ones and high-risk ones. The lower risk buyer values coverage substantially less than the high risk one. The seller, insurance companies, want to provide coverage to both, but finds that high-risk insurers, cost a lot more to insure than low risk coverage seekers. By current law, healthcare insurance companies are barred from refusing to provide coverage to people with pre-existing conditions(high risk buyers) or charging more based on their health(USA Today). Therefore, even if the insurers had perfect information on the amount of people that were high risk, it would not be able to use that information. This forces health care insurers to charge similar prices to coverage seekers regardless of risk. That being the case, the insurer will charge a price somewhere between what it would charge a low risk and high-risk buyer. If the selected price is higher than what low risk buyers value insurance at, none of them will buy coverage, leaving the insurance market with only high-risk buyers. Finally, a market failure will occur because the selected price is less than the cost of insuring only high-risk buyers, causing insurance companies to lose money and in the long term go out of business.
This is the Republican criticism of the ACA, and they argue that separating the insurance market into one with only low risk buyers and one containing only high risk buyers (the high risk pool) will drive down insurance costs for the majority of the population. Because the insurance provider faces no uncertainty on the type of person they are covering, they will be able to charge a lower price on the low-risk market that most could afford. Although the high risk people will be charged substantively more than the general population, Republicans argue that subsidies will take care of that issue.