Temporary high-risk insurance pools to start in July

The success of the programs could hinge upon coverage affordability, experts say.

By Doug Trapp — Posted April 26, 2010

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A provision in the health reform law soon will provide new coverage options for people with preexisting conditions, but the cost of these high-risk insurance pools could pose problems.

The Patient Protection and Affordable Care Act includes $5 billion to start new temporary coverage programs for people with preexisting medical conditions who have been uninsured for at least six months. The programs would supplement existing ones in 34 states that covered about 200,000 people at the end of 2008, according to a Kaiser Family Foundation analysis released in January.

The new law give states a choice between building on existing high-risk pools, creating new ones or deferring to the federal government to start them, according to an April 2 statement by Dept. of Health and Human Services Secretary Kathleen Sebelius. The coverage will begin on July 1 and expire on Jan. 1, 2014. That's the date when the health reform law starts prohibiting health insurance companies from revoking or denying coverage based on health status or preexisting conditions.

"The main thing about risk pools is that their success depends on affordability," said Amie Goldman, chair-elect and vice president of the National Assn. of State Comprehensive Health Insurance Plans. She is also CEO of Wisconsin's high-risk insurance plan.

Federal and state subsidies are important for keeping the state high-risk coverage affordable and attractive, Goldman said. The least costly high-risk coverage -- the most subsidized -- still costs a bit more than non-group insurance. The most expensive plans -- the least subsidized -- cost about twice as much as non-group coverage, she said.

Premiums in the federal high-risk program will be capped at the same level as individual market premiums for the same coverage, noted Kathleen Stoll, director of health policy for Families USA, a liberal health consumer advocacy organization. "Rates are not higher because you're in a pool with higher risk."

Premiums for high-risk plans have been increasing just as quickly as premiums for other types of insurance, according to the Kaiser analysis. Also, most high-risk plans have larger out-of-pocket costs compared with other health insurance. High-risk plan deductibles, for example, averaged $1,593 in 2008 for the most popular plan in each state, about three times the average deductible for employer-sponsored coverage, according to a Government Accountability Office report released in July 2009. Benefits packages for high-risk plans are more uniform across states, Goldman said.

Although the state high-risk programs serve about 200,000 people, many more might qualify. The GAO report estimated that 4 million people could meet the state coverage standards. This year alone, 375,000 people might obtain high-risk coverage under the federal program, according to an analysis released in December 2009 by Centers for Medicare and Medicaid Services Chief Actuary Rick Foster.

Despite this potential demand, few of the state high-risk programs have waiting lists, Goldman said. Foster, however, warned that the $5 billion in federal funding could be exhausted by 2011 or 2012, leading to premium increases that would limit participation.

Stoll said the federal program needs to be defined more clearly to project how many people might participate and how much it might cost.

Georgia says no

At least one state has deemed the high-risk program too risky. Georgia Insurance Commissioner John Oxendine notified Sebelius on April 12 that he will not create a high-risk insurance program in the state, one of 16 that does not already have a high-risk pool. Oxendine -- a Republican who is running for governor in November-- said he believes state spending will increase significantly in the long term under the federal program.

"I am concerned that the high-risk pool program will ultimately become the financial responsibility of Georgians in the form of an unfunded mandate," Oxendine wrote. Sebelius responded that HHS will create a program for Georgia residents. HHS spokeswoman Jessica Santillo said states are not obligated to contribute to the cost of the program.

The Medical Assn. of Georgia supports eliminating preexisting condition exclusions, but the association doesn't yet know enough about the federal high-risk pool program to offer a position on it, said MAG spokesman Tom Kornegay.

States' fiscal conditions are not expected to improve much in the short term, according to a survey released in March by the National Conference of State Legislatures. Although 42 states predict that their fiscal 2011 revenues will increase over fiscal 2010 levels, 38 states expect a combined fiscal 2011 budget shortfall of $89 billion.

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A new option for the uninsurable

The health reform law enacted in March includes $5 billion to help provide coverage to uninsured people whose medical conditions have kept them from getting insurance. The coverage will be made available through temporary high-risk pools that will:

  • Be open to U.S. citizens with preexisting conditions who have been uninsured at least six months. The Health and Human Services secretary will define "preexisting condition."
  • Begin operating by July 1 and expire on Jan. 1, 2014.
  • Distribute federal funding based on state costs, similar to the Children's Health Insurance Program.
  • Only include health plans that pay at least 65% of the costs of their benefits. Out-of-pocket costs can't exceed $5,950 per individual and $11,900 per family in 2010. Premiums for older individuals can't be more than four times as expensive as those for younger individuals.
  • Be built upon existing coverage programs for high-risk people or will be entirely new high-risk pools.

Source: Dept. of Health and Human Services

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