High-Risk Pools Set to Begin in July, But Funding, Fairness Questions Remain
In July, some of the first money allocated by the new health care reform law will start flowing to states to fund temporary high-risk insurance pools. These pools are intended to extend insurance coverage to some of the most medically vulnerable people in the United States — those who have been denied coverage due to a pre-existing condition.
High-risk pools already exist in 35 states, but the chronically underfunded programs cover only about 200,000 people nationwide — just a fraction of those who could use it. And the plans they offer can cost significantly more than standard insurance. The new health reform bill’s $5 billion infusion of federal cash will expand the high-risk pool option to people in every state — and it will require the federally-funded pools to offer insurance at rates no higher than what healthy people pay.
The pools are a temporary fix; they’re designed to last only until 2014, when new regulations will go into effect requiring insurance companies to accept all applicants, regardless of pre-existing conditions.
But even as states and the Department of Health and Human Services gear up to open the new pools, questions remain about whether the $5 billion will be enough to fund them for three years — and about whether the new law is fair to people who are already enrolled in the older, more-expensive pools.
In fact, 19 states so far have told the federal government they’d prefer not to run the pools themselves, and most have cited cost as the main concern. (Under the new law, states can choose to run their own high-risk pool or have HHS run it for them.)
Because high-risk pools by definition insure people with expensive medical conditions, all the state pools lose money. Even though participants pay high premiums, the pools rely on other funding sources to sustain them, such as taxes on insurance companies or tobacco.
“Most experts believe [$5 billion] to be insufficient. In the coming years, state officials could be forced to reduce health coverage, raise premiums or ask state taxpayers to pay for these high-risk pools once federal funds run dry,” Texas Gov. Rick Perry said in a letter to HHS secretary Kathleen Sebelius explaining the state’s decision not to run its own pool.
States that choose not to run the pools will still get federal funds (allocated by population size and other factors) and the pools will still be available in those states — they’ll just be administered by HHS.
“In these states, HHS will have contracts in place to establish the high-risk pool programs by July 1st,” HHS spokeswoman Jessica Santillo says.
States’ decisions on whether or not to run their own high-risk pool could be seen as a reflection of their support for the new law. Many of the states that have opted out of running the pools have Republican governors. But not all of them. Wyoming’s Democratic Gov. Dave Freudenthal wrote to Sebelius:
“I am aware that this allocation is in addition to the premiums paid by enrollees to the program; however, I still worry that the allotted money may prove to be insufficient to fully operate this program until 2014.”
Some policy experts think the governors are right to be worried.
“Nobody believes that the $5 billion is enough to cover a significant number of people for four years,” Stephen Finan, senior director of policy for the American Cancer Society Cancer Action Network, told NPR.
Still, 28 states and Washington, D.C. have told HHS that they will run the pools themselves. Those states could begin receiving money as soon as July 1, though the amount of time it will take for them to begin enrolling applicants will vary, experts say.
In Maryland, which already has a high-risk pool that covers more than 15,000 people, the pool’s executive director Richard Popper said it might be possible to begin covering people within 60 days — just long enough to circulate and process applications. But other states could take longer.
“There are eight states that have said ‘yes we’ll run these,’ but they have no current program,” says Richard Cauchi, director of health policy for the National Conference of State Legislatures. “For those states, there will be more steps and maybe more challenges in having to develop in the next 39 days a full-blown structure.”
Meanwhile, another issue has bubbled up and gained attention in the past few weeks: the plight of the 200,000 people currently enrolled in state high-risk pools.
Those people are generally paying premiums that vary from 10 percent to about 50 percent higher than standard rates. Many of them would likely want to switch to the new, federally-funded pools, which by law won’t be able to charge more than standard rates — but they probably won’t be able to. That’s because the new pools require applicants to have been uninsured for six months before they become eligible for coverage. And many people with pre-existing conditions — cancer survivors, diabetics and others — can’t risk going six months without insurance.
In fact, at least two states, Texas and California, are warning applicants to their current state pools that they might want to wait for the federal pool to kick in.
Candace Talmadge is a writer in Texas who has been covered by the Texas high-risk pool for about a year. In Texas, the high-risk pool premiums can be as much as twice standard rates. When told by a reporter about the new, cheaper federal pool, Talmadge said that the situation makes her angry.
“I have a nonprintable response to that one,” she said.
But Cauchi says that the situation, while unfortunate, is no one party’s fault.
“It’s not the states, it’s not the federal government,” he says. “Both have attempted to say ‘Here is the program we can offer […]’ No one suggests that high-risk pools are a picture-perfect solution. These are not perfect matches to people’s problems.”