State high-risk pools fail to deliver affordable premiums

The lack of reasonably priced health coverage has spawned a rash of insurance scams, costing patients and employers millions of dollars.

By Joel B. Finkelstein, AMNews staff. Sept. 15, 2003.

Washington -- Many states are looking to high-risk pools to address the lack of affordable coverage, a problem that has led to an increase in scams in the individual health insurance market.

High-risk pools have the potential to absorb so-called "uninsurables" while making the individual market more affordable for others. But most states have failed to deliver on this promise, experts said.

The cost of operating high-risk pools is more than the pools can collect in premiums. The programs are generally subsidized through a tax assessment on all of a state's health insurers, both individual and group plans. This spreads the cost of providing health services to a sicker population across a larger group of insured people, instead of relying on the relatively small individual market to cover the chronically ill.

But this subsidy strategy has not proved sufficient to bring premiums for the high-risk pools low enough, said Karen Pollitz, project director at Georgetown University's Health Policy Institute. Coverage rates for high-risk pools can run anywhere from 110% to 200% of the average cost of the state's individual market premiums.

Because they are so expensive, few people can afford to participate in the programs. "In most states, you can invite the high-risk pool over for dinner," Pollitz said.

Among the 31 states that now have high-risk pools, only a handful of programs have more than a few thousand enrollees, according to a new report from Communicating for Agriculture and the Self-Employed.