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The problems with high-risk pools

What do we do with people who are uninsurable because they have a pre-existing medical condition?

That is a particularly important question as both McCain and Obama propose reforming American health care by building on the private health insurance system.

One of the solutions being discussed–by McCain among others–is to use state-based risk pools. Under McCain’s plan heavily dependent on an individual platform, people who don’t have employer-based coverage and healthy enough to qualify for individual health insurance could get a private mainstream plan and people who do not qualify for a standard individual plan could buy into a state-run high risk pool for the uninsurable.

In today’s market, these state-run pools can be lifesavers for those who can’t otherwise get coverage. But of 47 million uninsured, only about 200,000 people are in these pools nationwide. Sometimes the pools are prohibitively expensive, sometimes they are full and taking no new members, sometimes their coverage is hardly worth it.

One of the states that proponents point to as doing a good job with its risk pool is Minnesota.

Minnesota does have one of the better pools for those who are uninsurable. It offers a wide range of plans with a maximum cost of 125 percent of comparable market plans that medically underwrite. A family of four can get an HSA-style plan for about $9,000 a year (parents age 35-39). A couple age-60 can get a $2,000 deductible, 80/20 plan for about $12,500 a year. Pre-existing conditions are excluded for six months if you do not have prior creditable coverage.

If you are uninsurable in Minnesota–and can afford those premiums–you are likely facing some pretty high medical costs to make it worth your while. These plans tend to be anti-selection magnets in our voluntary system.

In 2006, there were about 30,000 enrollees in the Minnesota high risk pool (out of 465,000 uninsured in the state). Minnesota had a total program cost of $236 million that year. Of that, $124 million–more than half the funding–came from state subsidies collected by an assessment on insurer premiums. The per enrollee subsidy coming from state government was $4,265. That family of four had a state subsidy of over $16,000 that was added to the $9,000 premium they paid.

So, how does a state-based risk pool work?

In Minnesota, if you are uninsurable you qualify only for the limited state plans, at a cost that is up to 25 percent more than in the mainstream market, and the state government has to come up with a subsidy of more than $4,000 per participant to make it work–and it still costs you a lot.

If the federal government were to pass a health care reform bill that required the states to set these pools up, as McCain proposes, wouldn’t that just be another unfunded state mandate?

I can’t figure out why John McCain wants to go to voters with the unappealing notion that those with pre-existing conditions are going to be shipped off to a risk pool like Minnesota’s when we could accomplish something better by putting them in mainstream health plans using proven market-based reinsurance principles and underwriting rules.

If assessing insurers for the cost of high risk consumers, as they do in MN, is a good idea why not do it through the front door and promise those with pre-existing conditions they can get into regular coverage? (See also: John McCain’s Health Care Plan and the Uninsurable–There Are Better Fixes Than the Ones He’s Proposed.)

If nothing else, the market ought to tell the McCain health care planners something–out of 465,000 uninsured in Minnesota, only 30,000 are buying the product.

I don’t think the voters are going to buy it either.

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FactcheckmarkelliottgPeter Recent comment authors
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Factcheck
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Factcheck

By definition, high-risk pools are only available to high risk patients, people who are denied coverage due to medical conditions, not finances. So, Bobbo, when you state that only 30,000 of the 465,000 uninsured in MN are using the product, you’re cooking the numbers. Those 465k can’t all qualify for the program.

Factcheck
Guest
Factcheck

By definition, high-risk pools are only available to high risk patients, people who are denied coverage due to medical conditions, not finances. So, Bobbo, when you state that only 30,000 of the 465,000 uninsured in MN are using the product, you’re cooking the numbers. Those 465k can’t all qualify for the program.

mark
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mark

I know you said the high risk plans in Minnesota are 25% higher than the general market, but I find that hard to believe. In California, the percentage starts at about 200% over the general market rates, and goes much higher, that is if you can get a plan. There is an 8 to 12 month waiting list, the plans are under funded, and they too are very limited, high deductible plans. If you are right and they are paying only 25%, that is a great deal. I have heard Insurance Companies have a strangle hold on California and that… Read more »

elliottg
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elliottg

I prefer universal access, but I think you are underestimating the insurance value of Minnesota’s program. In other words, the uninsured may be fine with foregoing insurance knowing that there is a subsidized alternative if they become sick. It would be interesting to see how many enrollees enter the system only after their ongoing medical costs rise to a point that it is a guaranteed “win” for them even with a 6 month exclusion. Those numbers would be easy to obtain and would yield an interesting paper with minimal effort. Also the 465,000 figure in your denominator overstates your market… Read more »

Peter
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Peter

How about the risk pool in a single-pay system – it will be ALL the citizens of this country. Of course a single-pay system will not include a need for insurance companies and their profits so inclusion/exclusion will not be an issue – EVER. As long as we continue to believe that a private insurance solution is necessary to solve healthcare access and affordability this growing crisis will not be solved.