A Harsher World Awaits | What the World Would Be Like Without Risk Adjustment

December 23, 2016

 

A Harsher World Awaits | What the World Would Be Like Without Risk Adjustment

In a world where the Patient Protection and Affordable Care Act (PPACA) is the law of the land, risk adjustment plays a significant role in accounting for the health status and spending of people enrolled in an insurance plan. However, the world would be profoundly changed in the absence of risk adjustment as the relatively level playing field on which most insurers are currently competing would be tilted strongly against health care companies servicing areas that have an older or sicker population profile than the national average. Given that there are significant restrictions in place against insurance companies selling policies across state lines, states such as Arizona and Florida would become much less desirable as retirement destinations due to exorbitant health care costs and resulting scarcity of health care.

The current insurance policy premiums paid by many health care plan enrollees are lower than the actual costs borne by insurance companies. Insurers that get 'stuck' having a population of 'sicker-than-average' people receive compensation from the government to account for the extra medicare care required by those insured. In a world where risk adjustment no longer exists, the costs of providing health care for people having either serious pre-existing or chronic conditions would be so high that insurance providers would have no alternative but to deny coverage to this segment of the population. It is likely that insurance providers might triage people having chronic conditions into groups where:

  • the conditions are relatively inexpensive to treat and controllable with medication; for example, diabetes
  • the conditions are moderately expensive to treat and subject to complications; for example, kidney dialysis
  • the conditions are very expensive to treat with little cost mitigation; for example cystic fibrosis

People in groups one and potentially group two might still be considered insurable but the third group would be excluded.

Another consequence of risk adjustment's absence is a significant reduction in insurance availability for people who are 65 years of age or older. Age-related illnesses such as heart disease, dementia, Alzheimer's, osteoporosis, arthritis, etc., will inevitably affect most seniors making them among the most expensive to insure. As a person approaches the average life expectancy age for their gender, insurance providers will cease offering insurance. Consequently, unless the person is very wealthy, an uninsured senior will find themselves lacking the means to pay for the necessary medical care resulting in a shorter life span than what would otherwise be the case. In fact, assisted suicide would become a much more widespread option for seniors trapped between a serious, but potentially treatable disease and their ability to be insured. Whereas treating a serious disease could cost hundreds of thousands of dollars, the cost of a few pills to terminate a person's life would be a few hundred dollars at most.

The absence of risk adjustment would hit the young as well, particularly pregnant mothers and their unborn children. Complications during pregnancy are fairly common, especially for women who have reached advanced maternal age (35+). Insurance companies might balk at covering any costs besides routine checkups and ultrasounds for older mothers as there is a higher risk of fetal defects or other abnormalities. If a serious fetal defect is found while the child is in utero, then corrective surgery may not be covered due to the inherent risks and potential costs of this surgery. Children who are born extremely premature or with significant health defects will find care difficult to come by based on the uncertain long-term prognosis and the expectation that significant health costs will be incurred over the child's lifetime. As with seniors who are suffering a serious chronic condition, newborns or children who are facing a difficult medical road may be encouraged to choose euthanasia due to either the daunting medical costs or absence of necessary treatment.

In a world without risk adjustment, the healthy, the young and the wealthy would navigate this world with few, if any, hardships arising from its absence. However, people with chronic conditions, advanced age or other long-term medical care needs would greatly suffer. To learn more on how to cope with the potential loss of risk adjustment in the future, contact us and let us choose the best option for ensuring your golden years.

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