Also of concern is what will happen to the nearly 200,000 people nationwide who are covered today through existing state-run high-risk pools—and who likely won't qualify for better, lower-cost coverage through the new pools.
“This program presents an opportunity for people who have just been shut out of health insurance, even if they could afford the premiums,” says Karyn Schwartz, senior policy analyst at the Kaiser Family Foundation. “It will hopefully decrease the burden of uncompensated care.”
Listen to a podcast discussion of funding issues for the high-risk insurance pools
On April 2, HHS Secretary Kathleen Sebelius sent letters to all states soliciting their interest in running a new high-risk pool with federal funding. According to HHS, 29 states and the District of Columbia have opted to run the program, while 19 states declined to participate, meaning that HHS will operate the program in those states. Two states—Utah and Kentucky—had not yet decided at press time (view map of states).
States that chose to run the program had until the end of May to submit an application to HHS outlining how they will structure it. Utah and Kentucky have both requested applications, according to HHS. The federal agency is expected to issue further guidance on the program in June, with the goal of having the program up and running in July.
The parameters, so far, are fairly broad. Those eligible must be citizens, nationals or legal residents, have a pre-existing medical condition “in a manner consistent with guidance issues by the secretary” of HHS, and must have lacked “credible coverage” for at least six months.
What qualifies as a pre-existing condition or “credible coverage” are yet unknown—and both could determine how many people are eligible for the program.
For instance, what if a person has catastrophic coverage in the individual market, say in a state such as New York, which doesn't allow insurers to deny people based on pre-existing conditions? It's possible that someone in that situation could prove their coverage is not credible and switch into the new high-risk pool right away, says Sara Collins, vice president for affordable health insurance at the Commonwealth Fund. But Collins cautions that the intent of the program is not to give better coverage to people who already have it.
HHS “views this as an interim solution for people who don't have coverage,” she says.
That could leave people already enrolled in existing high-risk pools paying higher premiums with skimpier coverage, according to disease advocacy groups. Currently, 34 states operate high-risk pools, covering nearly 200,000 people total. These programs differ from state to state in terms of eligibility requirements and cost of coverage. But by and large, the costs to enrollees are higher than they will be in the new pools.
Stephen Finan, senior policy director at the American Cancer Society's Cancer Action Network, says the situation is unfair. “The new program was clearly intended to be a stopgap measure to provide some relief to the existing uninsured,” he says. “But they didn't think it through carefully. I don't think the staff members in Congress thought the inequity issue would arise.”
The minimum benefit package of the new pools will be determined by HHS, probably in June. Plans must cover at least 65% of healthcare costs, and premiums must be set as if they are for a “standard population,” not a high-risk one, according to the health reform law. Premiums can vary by age by no more than 4-to-1. They can also vary by family composition and geographic variations. Out-of-pocket spending is limited to $5,950 for an individual and $11,900 for families annually, excluding premiums.
In many states with high-risk pools, the costs to enrollees are far higher. For instance, in Washington state, the monthly premium for a 50-year-old nonsmoker in a PPO is $932, with a $1,000 deductible. A lower deductible carries a higher monthly premium.
Washington state, which has agreed to operate the new high-risk pool, recognizes there will be a disparity between the two pools.
“We're not aware of any way to address the inequity,” says Stephanie Marquis, spokeswoman for the Washington State Insurance Department. She adds that the state Legislature could provide some premium relief to members of the current high-risk pools, but that is unlikely considering the state's budget woes. She says the state has not yet received any complaints from enrollees in the current high-risk pool.
But Finan says there could be some way to provide help to current enrollees on a national level. “I wouldn't be surprised to see proposals to try to give some relief,” he says.
One option is for people in the current high-risk pools to drop coverage for six months and then hope to qualify for the new pools. Finan says cancer patients would be unlikely to do this because they need continuous coverage.
But Jean Hall, a research assistant professor at the University of Kansas, and an expert on state-run high-risk pools, says some enrollees might take the gamble of going uninsured for six months in exchange for better coverage and lower premiums later.
“Some people in high-risk pools have pre-existing conditions that are not life-threatening,” Hall says. “I can see where people would at least consider taking the risk.”
These decisions will also depend on the affordability of the new pool plans and the generosity of current state coverage. Some states offer premium subsidies to current enrollees.
Estimates differ on how many people are likely to join the new high-risk pools. According to an April 22 report from CMS actuaries, about 375,000 people would gain coverage through the program this year, increasing national spending by $4 billion. By 2011 and 2012, the initial $5 billion in federal funding would be exhausted “resulting in substantial premium increases to sustain the program,” according to the report. “We anticipate that such increases would limit participation.”
And a report issued last week by the not-for-profit National Institute for Health Care Reform also concluded the funding would fall far short. It estimated that between 5.6 million to 7 million people may qualify for coverage in the new pools, but the $5 billion would cover only about 200,000 people.
Limited funding “means the administration will have to make hard choices to stretch the dollars as far as possible,” says Paul Ginsburg, director of research at the institute and president of the Center for Studying Health System Change.
Some states also have expressed concern about the program's costs. Minnesota cited this as one reason why it would not participate. Minnesota operates one of the oldest and largest high-risk pools. It launched in 1976 and has about 27,400 enrollees.
Minnesota would have received $68 million from HHS for the 3½-year program. But it pays $245 million annually in claims for its current high-risk program. “The funding mechanism is insufficient to meet the needs” of the new program, Lynn Gruber, president of the Minnesota Comprehensive Health Association, which operates the state's high-risk pool, wrote in a letter to the Minnesota Commerce Department dated April 27.
Gruber also worried that the state could be liable for funding shortages and that the time frame for implementation was too short.
By and large, the states that declined to participate in the program are run by Republican governors, including Minnesota. But seven participating states are led by GOP governors. Of those opting out of the program, three are led by Democrats and one, Florida, is led by Republican-turned-independent Charlie Crist.
Still, Finan and others say the concerns raised by Minnesota are legitimate.
“It's a very demanding and unrealistic deadline that 50 states could start an entirely new program in just 60 days,” Finan says.
Washington state, for one, plans to run the new pool using the administrator of the state's existing high-risk pool, which could help it get off the ground more quickly.
“Some states don't want to be left holding the bag,” Marquis says. “We'll administer it with the money we are given and monitor it the way we do with the current high-risk pool. Maybe that means cutting off enrollment if there isn't enough funding.”
Indeed, in the application, states are given significant leeway in how they will run the programs, including enrollment limits, says Hall of the University of Kansas. “The federal application basically says, ‘Tell us what you want to do, and we'll approve it,' ” she says.
For the 19 states that have opted not to participate, HHS has issued a solicitation request from not-for-profit private organizations seeking to administer the program. Not-for-profit Blues plans, for instance, may administer the program in some states, several sources say.
Administrators must be able to handle claims processing, provider contracts, utilization review, member services, marketing and premium collections, according to the solicitation, posted on April 20. The response deadline was May 4.
Although states are expressing concerns about liability—including those that have agreed to participate—Hall says she doubts they would be on the hook for funding shortages. “My understanding is that the HHS would have to absorb it,” she says. “I'm not convinced personally that is a true concern.”
Everyone will be watching to see how popular the program becomes, and much of that will hinge on communication with the general public.
Nearly half of the 15.6 million uninsured, nonelderly adults nationwide have at least one chronic health condition, according to the Urban Institute. In 2008, health plans denied more than 223,000 applicants for individual insurance policies, according to America's Health Insurance Plans, a trade group representing insurers.
To be sure, there is pent-up demand for affordable insurance, says Schwartz of the Kaiser Family Foundation. But the program could still be out of reach for some people.
“It won't be free, and there won't be any subsidies based on income,” she says. “Will it get rid of uncompensated care? I think that is ambitious.”