State and Federal High Risk Pools

Bernadette Fernandez and Mark Newsom January 20, 2011

CRS-2

State High Risk Pools

State High Risk Pools

• Majority of states have high risk pools (HRPs)

• Established prior to federal health reform law—PPACA

• Private health insurance options for individuals with preexisting health conditions

• Difficulties obtaining insurance in the private market

• Compliance with federal law—HIPAA

State High Risk Pool Characteristics

Structure

• Typically non-profit entities

• Board administered

• Generally risk bearing

Eligibility

• Experienced denials, coverage exclusions, rate-ups

• Qualifying health condition

• HIPAA eligible

Benefits

• Variety of plan options – generally PPOs and indemnity plans

• High deductibles are common ($1,000 or greater)

State High Risk Pool Characteristics

Premiums

• Many states allow rating based on age, sex, and tobacco use

• Almost all states cap premiums – between 150-200% of standard rates

Sources of Funding

• Assessments on insurers and health care providers

• General revenue

• Federal grants

• Premium collection

• Other

Experience of State High Risk Pools

• Enrollment: 208,000 (as of 12/31/09)

• Total claims: $2.07 billion (2009)

• Claims as a percent of premiums – exceeds 100% in most states

Federal Grants to States

Grant Types

• Seed – establish HRP or conduct feasibility studies

• Operational – cover operational expenses

• Bonus – premium subsidies, cost-sharing reductions, eligibility expansion, more benefits, etc.

Appropriations

• 107TH Congress: $100 million (2003-2004 awards)

• 109th Congress: $100 million (2006-2007 awards)

• 110th Congress: $49 million (2008 awards)

• 111th Congress: $74 million (2009 awards); $55 million (no awards posted)

Required subsidies (2008)

• All but one HRP required subsidies to cover operational costs

• Subsidy requirements: $1.3 - 141.2 million

CRS-8

Federal High Risk Pool Program

Examples of high risk pool bills in the 111th Congress

• H.Amdt.510 substitute amendment to H.R.3962 (Rep. Boehner)-would have created high risk pools in states without them and funded the new and existing pools with $15 billion FY2010-19.

• H.R. 3218 (Rep. Shadegg)-would have established a 50% federal matching fund for state high risk pools.

• H.R. 4038 (Rep. Camp)-same as H.Amdt. 510.

• H.R. 3962 (Rep. Dingell)-high risk pool provision similar to the Patient Protection and Affordable Care Act.

• S.1099/H.R.2520 (Sen. Coburn and Rep. Ryan)-high risk pools, reinsurance markets, or risk adjustment mechanisms to cover those deemed “uninsurable.”

• S.1796 (Sen. Baucus)-high risk pool provision similar to the Patient Protection and Affordable Care Act.

Pre-Existing Condition Insurance Plan (PCIP): §1101 of Patient Protection and Affordable Care Act (PPACA)

• Intended to serve as a bridge to 2014 when the prohibition on pre-existing condition exclusions takes full effect.

• Requires the Secretary of Health and Human Services to establish a temporary HRP no later than 90 days after enactment and ending on January 1, 2014.

• The Secretary may carry out the program by contracting with states or a nonprofit private entity.

• Appropriates $5 billion.

PCIP Eligibility

• Be a citizen or national of the United States or lawfully present in the United States;

• Not have been covered under creditable coverage for the previous 6 months; and

• Have a pre-existing condition.

PCIP Premium Rating

• Equal a standard rate for a standard population (not exceed 100% of the standard non-group rate); and

• Do not vary by age by more than 4 to 1.

State Role for PCIP

• Operate a new high risk pool alongside a current state high risk pool;

• Establish a new high risk pool; or

• Do nothing and HHS operates the PCIP in that state.

Oversight issues

• Enrollment

• Cost

• Premiums

• Eligibility

Oversight issue: Enrollment

Source: HHS http://www.healthcare.gov/news/factsheets/pre-existing_condition_insurance_enrollment.html

• 8,011 enrollees as of November 1, 2010.

• Would enrollment be higher if premiums were lower or subsidized for low-income individuals?

• Are prospective applicants unaware of the program?

• Are the eligibility requirements (6-months uninsured) a barrier?

Oversight issue: Cost

• Cost linked to enrollment-“CBO estimated that the funding available for subsidies would not be sufficient to cover the costs of all applicants through 2013, so CBO assumed that HHS would use the authority given to it under the act to limit enrollment in the program.”

• House Majority concerned about reports of higher than expected per member claims costs.

Sources: CBO June 21, 2010 letter to Sen. Enzi and House Republican Conference, Obamacare: A budget-busting, job-killing, health care law, JANUARY 6, 2011.

• In 2010, monthly rates for a nonsmoking 50-year-old range from $240 for a $5,000 deductible plan in Utah to $1,006 for a $1,500 deductible plan in Alaska. In the federal PCIPs premiums for a 50-year-old range from $330 in Hawaii to $556 in Florida, with an average of $455.

• PPACA does not provide for a low-income premium subsidy for enrollees in PCIPs.

Oversight issue: Premiums

Oversight issue: Eligibility

• Is the 6-month uninsured requirement too restrictive?