The Maine model: A closer look at the risk-sharing program that caught the GOP's eye


When House Republicans introduced an amendment Thursday to the American Health Care Act, some healthcare policy experts were not impressed.

The amendment, authored by conservative Reps. Gary Palmer and David Schweikert, would allocate $15 billion over nine years to create a “federal invisible risk-sharing program” modeled off of a pre-Affordable Care Act individual market overhaul in Maine.

In a blog post for the left-leaning Center on Budget and Policy Priorities, Edwin Park, the group’s vice president for health policy, calls the proposal “much ado about nothing.” Since the original bill already includes a state stability fund, the amendment would produce “at best only a modest additional benefit in stabilizing the market,” he wrote.

And Larry Levitt, Senior Vice President of the Kaiser Family Foundation, tweeted that the funding for the amendment wasn’t nearly enough to make a difference:

Yet Joel Allumbaugh, a past board member of the Maine Guaranteed Access Reinsurance Association, has reason to believe the program that turned around the state’s struggling individual market can also patch up the ACA exchanges.

“Our market was in a death spiral, and insurers were fleeing, and rates were rising, and sort of a lot of the same types of things that we’re reading in the headlines nationally today,” he said in an interview with FierceHealthcare. “Maine needed to transition out of that and try to arrive at a place where we could stabilize markets here.”

For Maine, that meant creating and implementing an invisible risk-sharing program.

What ‘invisible’ means

The term “invisible,” Allumbaugh explains, reflects the fact that from consumers’ standpoint, they’re not aware that those with preexisting conditions are being funneled into a risk-sharing program behind the scenes.

That sets the program apart from traditional high-risk pools, which many states had in their individual markets pre-ACA. In that model, insurers would decline to cover individuals with certain preexisting conditions. Instead, these customers would have a different set of plans to choose from, many offering skimpier coverage and higher premiums than those available for healthy consumers.

RELATED: Ask an actuary: How might Republicans revive high-risk pools in an ACA replacement?

But in the invisible risk-sharing model, individuals with preexisting conditions can buy the same type of policies—with the same premiums—available to everyone else. When they apply for coverage, insurers automatically transfer people with certain preexisting conditions to the risk-sharing program, and can also use their underwriting discretion to determine whether they were going to move someone to the program, Allumbaugh said.

Risk-sharing vs. reinsurance

While some have pointed out that Maine’s model bears a striking resemblance to the ACA’s temporary reinsurance program—which reimbursed insurers for a portion of their high-cost claims—Allumbaugh noted that they are some key differences.

Perhaps the most important is the fact that the Maine program is prospective while the ACA’s reinsurance program was retrospective.

“In the federal transitional reinsurance program, essentially after the fact, the feds were throwing some money at the insurance companies to offset some of their losses,” he said, “Which I think is why so many people characterized it as an insurance company bailout.”

With an invisible risk-sharing structure, insurers can only transfer someone to the risk-sharing program at the time of their application, so if someone gets sick later and generates high claims, “that’s the insurer’s responsibility,” Allumbaugh said.

And in Maine, when an insurer designated someone to the risk-sharing program, 90% of the premiums that it collected for that policy go into that program. The insurer also continued to retain some of claim liability for the person up to $10,000. So in effect, insurers were forced to make careful decisions about who they funneled into the risk-sharing program, since they didn't really profit from doing so.

That, Allumbaugh said, aligns incentives among all stakeholders “to get the most effectiveness out of the program.”

How the market reacted

As Allumbaugh and his colleagues detailed in a Health Affairs blog post earlier this year, individuals in their early 20s were able to see premium savings of nearly $5,000 per year, while individuals in their 60s saw savings of more than $7,000 after Maine switched to its invisible risk-sharing program.

Maine had also gone down to only one primary insurer in its individual market, but as a result of the risk-sharing overall, that insurer began to introduce new products and see substantial growth in sales and membership, according to Allumbaugh.

Total enrollment increased, and the average age of individual market members began to decline, all “indicators that the market was stabilizing,” added.

The ACA ultimately put an end to Maine’s risk-sharing program in 2014, just 18 months after it began, meaning it was impossible to chart longer-term effects, he noted. However, even in the program’s short lifespan, Maine did ultimately see additional insurance carriers come back into the individual market.

Scaling up Maine’s model

A newly released Milliman study, commissioned by the Foundation for Government Accountability where Allumbaugh is a senior fellow, mapped out what might happen if a program similar to Maine’s were to become federal law.

It found that it would: reduce average premiums in the new risk pool in the individual marketplace by 12% to 31%; reduce the number of uninsured individuals by 1.1 to 2.2 million; and require the federal government to spend $3.3 billion to $16.7 billion in the first year.

Some, including the Center on Budget and Policy Priorities’ Park, point out that the amendment’s ability to help reduce uninsured rates would hardly make a dent in the fact that the AHCA as whole is estimated to swell the number of uninsured by 24 million.

But larger-scale examinations of the GOP healthcare bill aside, Allumbaugh thinks it is worth trying to build upon Maine’s success with risk-sharing. The fundamentals of the program “can certainly work anywhere,” he said, so long as regional variations are taken into account.

To that end, he noted it’s helpful that the amendment leaves the Department of Health and Human Services some flexibility to implement it, “because I would expect for example, the conditions driving healthcare costs in the southwestern quadrant of the united states might look a little different than they do in the northeast quadrant.”

As for doubts about whether $15 billion is enough to fund it, Allumbaugh argues that an investment in a program like Maine’s can have a much more significant impact than something like the ACA’s traditional reinsurance program.

“I agree that it’s a small amount in the big picture, but I wouldn’t overestimate its effectiveness,” he said, adding, “I think that’s the beauty of a program like this.”