One of the health care reform proposals before the General Assembly this session is the creation of a high risk pool for the uninsurable. A lot of other states (around 30) have risk pools, but other than hearing them mentioned as part of Kerry's campaign plans for reform, I didn't know much about them. If, like me, you aren't really sure what a high risk pool is, this post is for you.
Who participates: high risk pools are for people who can't get medical insurance in the marketplace because of an existing condition, or people who would have to pay extremely high premiums. The bill now before the house (H1535) says the you qualify for inclusion in the pool if you live in North Carolina and any of the following conditions apply:
- you've been rejected from coverage similar to the coverage the pool will offer by at least two insurers (not counting rejections from insurers who only offer "stop‑loss, excess loss, or reinsurance coverage");
- you've been offered coverage by at least two insurers but only if you'll accept a rider (or modification to the policy, most probably to exclude the insurer from having to cover your existing condition);
- you can't get insurance at a rate lower than the pool rate;
- you have a condition that's on a list maintained by the risk pool board, in which case you automatically qualify;
There are two more qualifying options, one for people who qualify for coverage under HIPAA and another for people who qualify for a health insurance credit under the Trade Adjustment Assistance Reform Act of 2002. Dependents of people covered by the pool are also covered.
Now that we know who is eligible for the pool, let's see what the pool does: it provides health insurance for the people in the pool at rates higher than market rates, but not too much higher. The state first determines the "standard risk rate" by looking at what other insurers are charging and paying actuaries to work their magic. At the beginning of the pool, its rates must be between 125% and 150% of standard individual rates. Adjustments can be made later to cover pool expenses and expected payouts, as long as they stay under the 150% ceiling. The pool Board is allowed to adjust rates according to "age, sex, and geographic variation in claim cost."
Who pays: When you're insuring the least insurable people in the state can only charge up to 150% of market rates, you're going to need a second source of income. House Bill 1535 leaves the question of what that source will be to the Board that will be established by the new law, but encourages the Board to consider what other states have done in making their recommendation to the General Assembly. There are several possibilities:
- Get the money from insurance carriers and HMOs. This could be in the form of a tax based on the amount of business the insurer does in the state. This method says "If you're going to do business in this state, you have to help us insure the very sick." Assuming that the insurers will pass this expense along to its customers, there will be a small increase in premiums in the state. Since the pool rates for individuals are based on market rates, the cost is spread shared by those inside and outside the pool.
- Get the money from state funds... which come from taxes. This plan distributes the cost of the high risk pool along the same lines as North Carolina's tax burdens.
- A combination of the last two options: get the money from insurers and give them some kind of tax credit in return. The taxes we don't collect from the insurance industry will have to be made up elsewhere (or spending in some other area will have to be reduced).
I used this handy website in drawing up this list. If you follow that link, you'll find the list broken down in greater detail, along with which states employ which methods. You'll also find this warning:
Reality - state budget problems are so severe now, prospects of new state funding for risk pool deficits are slim. Some form of assessments are likely for new states. Federal shared funding is needed and will be important for continued operation of state risk pools if they are to be open and providing affordable coverage for the uninsurable population. Especially important if the federal government adopts programs that send more people to high risk pools.
That's probably more than enough for one post, and hopefully it's enough to give a general idea about what's on the table. What do you think of the high risk pool plan? Also, it's not at all obvious to me how we should pay for it. Thoughts?