But after she was diagnosed with an acoustic neuroma — a non-cancerous tumor between the inner ear and the brain — her policy quickly became unaffordable.
Although the tumor was benign, it had to be surgically removed. After Talmadge, 55, submitted the claim to her insurance company, she says her yearly deductible skyrocketed from $2,500 to $10,000. Her premiums rose to more than $8,000 per year.
“As soon as I had that claim,” she says, “it went sky-high.”
Talmadge began shopping for another option. She looked into an Aetna plan offered by the AARP, but the company turned her down — due to the neuroma as well as to her age and weight, she says.
Armed with her rejection letter from Aetna, Talmadge applied to the Texas Health Risk Insurance Pool — a state-sponsored insurance “safety net,” also called a high-risk insurance pool, for people who have been denied coverage by private insurers because of pre-existing conditions. Now, her plan through the pool costs her about $6000 per year in premiums, with a $7500 deductible.
The first high-risk state insurance pool began in Minnesota in 1977; more than thirty-five states, including Texas, now have one. Most are run by state-created nonprofits and are administered by private insurance companies. They’re funded differently in each state — through premiums, and also through revenue generated by assessments on insurance companies, tobacco taxes, and other sources.
The pools have garnered attention recently as lawmakers consider health care reform, with bipartisan interest in using high-risk pools to cover more of the uninsured. Republican Senator John McCain of Arizona endorsed the idea, as has President Obama. It is included in the legislation that the Senate Finance Committee will vote on this week, which is expected to form the backbone of the legislation the full Senate will take up this month.
Under the Finance Committee plan, the high-risk pool coverage would be a temporary measure. By 2013, insurers would be prohibited from denying people coverage based on preexisting conditions, so it would no longer be necessary. But for the next several years, the high-risk pool would help fill an insurance gap.
But some experts say that states’ experiences so far show that high-risk pools are not necessarily an easy fix. Right now, the pools only cover about 200,000 people, a tiny fraction of the nation’s uninsured.
“You could almost invite some of these pools over for dinner,” says Georgetown University health policy expert Karen Pollitz. “They’re really dinky. There are only six that have more than 10,000 enrollees”
That’s at least partly because the coverage the pools offer is still too expensive for many people to afford.
In 2004, Boston University health economist Austin Frakt and his colleagues estimated that state-based high-risk pools covered only 8 percent, on average, of medically uninsurable people in the states where they were available.
That’s due to a combination of high premiums and low availability, Frakt says. Premiums in high-risk pools average about 150 percent of the cost of similar coverage available on the individual private market, and most states have little or no additional need-based subsidies.
And in some states, budget restrictions have led to enrollment caps — California has a waiting list to enroll, for example, and Florida has not accepted any new enrollees since 1990.
The percentage of eligible people covered varies widely from state to state. One of the most successful efforts is in Minnesota — Frakt estimated that the Minnesota pool covers 54 percent of those eligible.
“I think one of the major reasons we’ve been so successful is that our premiums have been relatively affordable,” says Lynn Gruber, president of the Minnesota Comprehensive Health Association, Minnesota’s high-risk pool.
By state law, she said, premiums cannot go above 125 percent of the average for the individual market, and they’re generally lower than that. The funding for the program comes from a combination of premiums and an assessment on private insurers in the state. Like all high-risk pools, it runs at a deficit — it collected $116 million in premiums last year and paid out $245 million in claims.
To run the program, Gruber says, “the dollars have to be there.”
The Senate Finance Committee legislation would attempt to solve that problem by injecting $5 billion in new funding for high-risk insurance pools. With that money, according to the legislation, premiums would be set at an equal amount as private-market individual plans.
Pollitz says she’s not sure that $5 billion would be sufficient to cover all the eligible medically uninsured — but that it’s a good start.
” How many people can you cover for 5 billion? Probably not everybody,” she says. “But a lot more than you’re covering now.”