High Risk Health Insurance Pool

For many people, health insurance coverage is something they take for granted. But for people with preexisting health conditions and chronic illness, finding health insurance outside the group market historically has been a daunting task.

Definition

• High-risk pools provide a coverage option for the "medically uninsurable."

  If insurers are not required to provide coverage to people with pre-existing medical conditions, those people often remain uninsured. The industry refers to them as "medically uninsurable," since they tried and failed to obtain health coverage, according to the National Association of State Comprehensive Health Insurance Plans.

  High-risk pools are state-regulated nonprofit groups that offer health insurance to individuals who would be unable to secure such coverage in the individual insurance market because of their health status.

New Pool

• A new temporary high-risk pool will cover medically uninsurable individuals until 2014.

  The U.S. Department of Health and Human Services is responsible for creating a temporary high-risk pool program by late June 2010 for medically uninsurable people. This pool will operate until 2014, when the new insurance exchanges in which companies compete for insurance business should be in operation. In the temporary pools, individuals won't be liable for more than $5,950 a year ($11,900 a year for families) in out-of-pocket costs. The pools will only accept people who have been uninsured at least six months.

  People in the pool will pay premiums to buy the coverage, but the federal government will provide $5 billion to subsidize expanded programs run by states if they choose that route; so far at least 28 have signed on as of May 1, according to the National Conference of State Legislatures. At least 16 states will have the federal government handle the new programs

States with high risk pools

• Most states have high-risk insurance pools

  As of early 2010, 35 states operated high-risk pools. The oldest were formed in Minnesota and Connecticut in 1976. Most people in the pools tend to be sicker and older, but not yet eligible for Medicare, the federal health program for people age 65 and older.

Problems

• In a survey of states with high-risk pools in 2007, the National Conference of State Legislatures found 30 out of 32 states that had pools at that time had a pre-existing condition exclusion that let insurers avoid covering medical services related to a prior health problem for two to 12 months. In addition, 24 state pools had a look-back period for pre-existing conditions of six months. Sixteen states offered coverage credit for prior insurance coverage, while 10 states offered coverage credit under limited circumstances.

Premiums

• Monthly premiums in high-risk pools are usually higher than the average for the individual market in the state. A typical high-risk pool rate is 125 percent to 200 percent of the average medically underwritten individual health insurance market rate, according to the National Association of State Comprehensive Health Insurance Plans
  But since people in the pool are considered medically high risk, the premiums alone won't cover the cost of paying claims and administration, so states need additional funding sources to cover costs. States also need to control rising health care costs. This has resulted in some states limiting enrollment of non-federally eligible individuals, limiting the amount of time someone can be in the pool, limiting the annual claim payment, increasing cost-sharing or closing enrollment.

Advantages

• Historically high-risk insurance pools have several advantages. The keep premiums stable in the individual market because those left in the market have less risk, on average. They provide a coverage option for a population that otherwise would be uninsured and forced to use costly emergency room care. They provide patient populations that could benefit from care coordination and disease management, and many high-risk pools are developing disease-focused care management that can reduce health care costs, according to the State Health Access Data Assistance Center.