Risk pools

Snapshot: Risk pools

Federal or state government programs or coverage-specific insurance products in which a premium is set and paid for coverage of a defined treatment for a group of individuals, thereby creating cost predictability.

Risks addressed
✓ Actuarial

Issues to explore

  • Risk pool size and sufficiency
  • Risk Corridors

Snapshot: Milestone-based Contracts

A short-term performance-based agreement in which the payer makes an upfront payment for the entire negotiated price of the therapy. The developer is then contractually obligated to provide a rebate if specific agreed upon performance milestones/outcomes are not met.

Risks addressed
✓ Performance uncertainty


  • Therapy performance established over a brief period
  • Preference for rebates rather than prospective payments
  • Ability to align on elements of a performance contract
  • Infrastructure for patient tracking to assess outcomes

Issues to explore
Medicaid best price reporting criteria for value-based payments

With the advent of cell and gene therapies (CGTs) payers should consider whether their current actuarial risk management and risk pooling strategies will meet their future needs.

Additional risk pooling could potentially help payers mitigate their actuarial risk, reducing variability by increasing the effective number of covered lives across which risk is spread.

For example, a number of organizations are now offering the potential to pool risk for defined cell and/or gene therapies through novel models of insurance products. Unlike reinsurance or stop loss, these specific therapy carveouts may or may not include patients’ total medical and drug costs.

State Medicaid agencies may form a risk pool with a carveout that may be used to pay for patient therapies. Historical experiments suggest this strategy should be pursued with caution. Prior to the Affordable Care Act, some states established high-risk pools to aid patients with high-cost preexisting conditions who were either priced out of insurance markets, refused coverage, denied employment due to insurance cost concerns, or some combination of these and other factors. The states’ experience of these risk pools was generally poor due to inadequate funding for the costs of the patients included. Any pool for CGTs would need to be carefully designed to ensure appropriate funding and share unexpected risks for affected patient populations.

Commercial insurers and self-insured employers who pool through reinsurance and stop loss policies respectively should reassess their current level of risk coverage and ensure that their reinsurance carriers do not exclude such transformational treatments, i.e. CGTs, or the patients that could benefit from them.