Covering Preexisting Conditions: High-Risk Pools versus Obamacare Mandates

by Jeffrey H. Anderson

In rightly championing the American people’s clear desire for the repeal of Obamacare, some Republicans are reportedly concerned that voters will ask them, “So, does this mean you’d allow insurers to continue denying coverage to people with preexisting conditions?” But Republicans should welcome this question — which, if they’re ready for it, is a hanging curveball they should knock out of the park.

GOP lawmakers can immediately provide much-needed help for the uninsured who have preexisting conditions by providing full funding for state-run high-risk pools (preferably in combination with offering long-overdue tax-breaks for the uninsured, as Ross Douthat advocates). Obamacare would address the problem of covering those with expensive preexisting conditions by mandating that insurers offer them coverage in the regular market, at artificially low rates.

For four simple reasons, which Republicans can successfully communicate to voters, the high-risk-pool approach makes colossally more sense:

1. High-risk pools wouldn’t invite government control of our entire health-care system; Obamacare would. Such pools offer a sensible solution to a particular problem without overhauling the rest of our health-care system in the process. Unlike Obamacare, they wouldn’t jeopardize the preexisting insurance of millions, consolidate power and money in Washington to an unprecedented degree, or compromise Americans’ liberty.


2. High-risk pools wouldn’t raise everyone else’s premiums; Obamacare would. People with expensive preexisting conditions are, by definition, more expensive to cover. If insurers are forced to charge such customers premiums that don’t reflect the actual cost of insuring them — as they would be under Obamacare — then they’ll pass along those costs to everyone else through higher premiums for all. If the government subsequently prohibits insurers from raising premiums for everyone, then insurers would either go out of business or ration care.

3. High-risk pools would cost under $20 billion a year; Obamacare would cost over $200 billion a year. As Jim Capretta and Tom Miller observe in greater detail in a recently published National Affairs piece, state-run high-risk pools can provide effective and affordable coverage. Depending on whether the number of uninsured with preexisting conditions is actually closer to 2.5 million, as I have estimated in my Small Bill proposal, or closer to 4 million, the high end of Capretta’s and Miller’s estimate, the annual costs would range from approximately $10 billion to $15-20 billion. That’s a lot of money compared to nearly anything else, but it’s a pittance compared to Obamacare. From 2018 onward, according to the CBO, Obamacare’s annual cost would be over $200 billion.

4. Obamacare’s approach would likely decimate the private insurance market. Not only would Obamacare cost more than ten times as much money as high-risk pools, but its approach would likely cause a “death spiral”: The rising cost of premiums (see #2) would lead many younger and healthier people to drop their coverage (knowing they could pick it back up as necessary, under the new rules) and pay the comparatively low fine that Obamacare would impose on them for not carrying insurance. This would make the remaining mix of people in the pool less healthy, and premiums would rise further in response; more healthy people would then drop out; premiums would rise even further; and so on.

After the government has put this chain of events into motion, private insurance would become less and less affordable, and eventually the government would come to the “rescue” with a government-run “public option” — which would mean even more expense and even greater government control.

On the whole, in offering a solution to the problem of making coverage available to those who are uninsured and have expensive preexisting conditions, the choice between state-run high-risk pools and federal Obamacare mandates could hardly be clearer: For over $200 billion a year, we could have higher premiums, less liberty, and — most likely – a decimated private insurance market. Or, for under $20 billion a year, we could solve a pressing human problem without subjecting ourselves to any of these disadvantages.

Repeal, anyone?

Critical Condition

NRO’s health-care blog.