A High Risk Pool for Health Insurance

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?


Great post, Lance

and as someone who used to work in the insurance industry I know how easy it is for someone to wind up in a higher risk category. It's a little more difficult to rate as completely uninsurable, but that tag follows you for a while. Some folks will always be uninsurable, but others wind up that way for temporary reasons or a combination of them. There are also people who are insurable, but have a condition that will be excluded from their coverage. My point is...since I'm not doing a good job of making it....there are a lot of people who could be helped by this. I think it's an excellent idea. People shouldn't be bankrupted by medical expenses and I don't think insurers should be either. If the public doesn't want a system of government controlled healthcare, then they have to get behind ideas like this that help those who are left out by private insurers.

Vote Democratic! The ass you save may be your own.

SD, thanks for the feedback

I'm kind of out on a limb with health care and insurance policy, but it's an area I'm trying to learn more about. So I really appreciate input from people who have experience in the area.

I forgot to mention

I'd wanted to mention how many states already have high risk pools. The map below comes from the Council for Affordable Health Insurance. States in red are those who do not have a high risk pool. On the CAHI website, the map is clickable for details of other states' plans.

No real pattern.

One is tempted to think that Blue states don't need it because they have good healthcare already, but then that wouldn't explain the middle of the country.

Jesus Swept ticked me off. Too short. I loved the characters and then POOF it was over.

Pre-existing conditions

One of the main problems that I have with insurance companies is the "pre-existing conditions" clause that they all have. In other words, if you're already sick and receiving treatment before you get insurance or even if you switch insurance companies, the new insurance company won't cover any treatment for that particular condition for a certain amount of time, usually one year. When I read your post and saw that the bill mentioned automatically being accepted in the pool for certain conditions, I assumed that even with these conditions you would have complete coverage.

I was wrong. According to the bill,

Pool coverage shall exclude charges or expenses incurred during the first 12 months following the effective date of coverage as to any condition for which medical advice, care, or treatment was recommended or received as to such conditions during the 12‑month period immediately preceding the effective date of coverage, except that no preexisting condition exclusion shall be applied to a federally defined eligible individual.

Sadly, that has to exist

This coverage would help those with chronic conditions in the long haul. It's still better than never having the option to have any coverage at all. Otherwise, everyone with an urgent health problem would rush to the plan and bankrupt it very quickly.

Depending on the coverage and how much patients are required to participate financially, they have to prevent those who are insured from leaving plans for better coverage once they find out they are sick. I know I'm not saying this very well. It's definately a three pot(coffee) morning and I'm only on my second cup.

Vote Democratic! The ass you save may be your own.

It does't have to exist.

If everyone had insurance there would be no need for pre-existing coverage exclusions. What we need to do is get everyone on private/medicaid/medicare and INSIST that they get preventive checkups twice a year. We would save boat-loads of money in the long run for everyone. Doctors, hospitals, patients, businesses - everyone except the insurance companies would make out.

Jesus Swept ticked me off. Too short. I loved the characters and then POOF it was over.

I know what you mean

even if I disagree with you. Clauses like this is what's hurting millions of Americans. For one thing, millions of American who are supposedly covered by insurance, find out that they really aren't covered and refuse medical treatment during the first year of coverage, which is very dangerous. Or, people know they are sick, but refuse to get treatment because they know if they get it now then they won't be eligible for coverage during that first year so they wait until they can get covered, which is also very dangerous. Either way, people are not getting the treatment they need and deserve because of insurance companies way of insuring their own continued business.

I have epilepsy and there have been several times that I have had to go with out coverage for anything to do with my seizures, which can be VERY expensive. This has happened when I changed jobs and also when I switched to my husband's insurance after I decided to stay at home with my son. Both decisions, which had more to do with my job situation and nothing to do with how good the insurance is, cost me quite a bit out of pocket because of the "pre-existing condition" clause. And this is not something that is going to go away. I will have to deal with this for the rest of my life.

ok, now who needs more coffee? I stopped at one cup and I think I should've had one pot!

health insurance is politics

at its most local. Like in your body. My husband and I didn't have it for years because we were self-employed and our income too spotty to be sure we could make regular payments.

He got good insurance through a new job last year and finally had that spot on his face biopsied. Oops. Malignant melanoma. Not expensive to treat. Would have been better to have the spot removed years ago, don't you think?

He's okay but if we go back to self-employment, how is he going to get health insurance? Thanks for your work, Lance.
“All the world's a stage,
And all the men and women merely players.”
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