States offered money for high-risk insurance pools

States with existing programs see good and bad in criteria required to get extra federal funding.

By Joel B. Finkelstein, amednews staff. Dec. 16, 2002.

Washington -- Twenty-seven states and the District of Columbia have the opportunity to grab a piece of $20 million in funding to help start high-risk pools for patients who cannot otherwise get health insurance.

State high-risk pools offer coverage to chronically ill patients who can't obtain health insurance in the marketplace. Because these individuals' health costs are so high, the pools are money-losing programs that must supplement premium revenues with taxes and other sources.

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As mandated by the Trade Act of 2002, the Centers for Medicare & Medicaid Services is offering up to $1 million dollars to states without a high-risk pool or with "unqualified" high-risk pools. CMS will also soon be doling out $80 million to states that are already running qualified pools.

To be qualified under Dept. of Health and Human Services rules, high-risk pools must offer insurance to all residents guaranteed coverage under the Health Insurance Portability and Accountability Act of 1996. The law generally aims to protect people from losing health insurance access when they lose or switch jobs.

HIPAA allows states to decide how to ensure access to people moving from the group market to the individual market. They could use the high-risk pools or require insurers to sell at least the two most popular policies or two policies representing low-level and high-level coverage.

Thirty states have high-risk pools, and 23 of those are qualified programs, as defined by HHS. The seven states with unqualified pools can apply for seed money to modify their program or to start a new pool without altering the existing program.

A state without a high-risk pool or with an "unqualified" one can get up to $1 million.

"It's nice to finally be recognized," said Barbara Brett, executive director of the Colorado Uninsurable Health Insurance Program, a qualified high-risk pool. The Colorado program covers high-risk and high-cost patients, most of whom can afford health insurance but can't find an insurance company that will sell it to them, she said.

With premiums that are 142% of average marketplace rates, price is the biggest problem with the pool, Brett said. And it may get even worse with state funds drying up and the cost of health care on the rise.

The nonprofit organization running the program relies on premiums, an assessment on health insurers and dwindling state funding. The federal money will come as a welcome cash infusion. But as funding becomes tighter, the program may need to freeze enrollment to continue covering the patients it already has.

However, because it is required to take all HIPAA-eligible patients, the program will have to continue accepting these enrollees, while medically eligible patients get shut out -- a step Brett said she hopes the program never has to take.

Declining the dollars

Despite the allure of federal money, Oregon, which has an unqualified high-risk pool, does not plan to change its program or seek the federal funds. Implementing a high-risk pool that meets HHS' definition would be a step backward, said Howard "Rocky" King, administrator of the Oregon Medical Insurance Pool, which covers more than 9,000 residents.

Because qualified pools are required to accept everyone who is HIPAA-eligible, these patients often have to pay premiums 15% to 50% higher than in the marketplace.

"That's not good social policy," said King. It funnels money to states to segregate high-risk patients, rather than keep them in the mainstream.

HHS has a very narrow definition of a high-risk pool, he said, one that would require his state to pull 25,000 to 30,000 patients out of private plans, where they pay the same premiums as everyone else. Oregon law requires health insurers doing business in the state to fulfill HIPAA eligibility requirements, keeping patients in the private sector.

"Which would you prefer to pay," asked King, "100% of what you are paying or 150%?"