High Risk Pools for Uninsured Persons with Pre-Existing Conditions
Posted on April 22, 2010 | Comments (3)
Beginning in 2014, individuals who do not have access to affordable employer coverage will be eligible to purchase insurance (with subsidies, if they qualify) through state health insurance exchanges regardless of any pre-existing conditions. In the near term, however, the question is how to help individuals who may not be able to obtain coverage because of a pre-existing condition. The health reform law immediately prohibits insurers and health plans from denying coverage to children under 19 because of pre-existing conditions, but the law contains no similar provision for adults.
Thirty-five states operated high risk pools as of 2010. A high risk pool makes health insurance available to persons with pre-existing conditions who cannot qualify for insurance because of a pre-existing condition. But state high risk pools cover relatively few people because of their high premium costs, which can range from 125 percent to 200 percent of the standard individual insurance premium rate charged to a standard population with no underlying health conditions.
Changes Made by the Health Reform Law
Pub. L. 111-148, §1101
- The law directs the Secretary of Health and Human Services to establish a “temporary high risk health insurance pool program” to provide health insurance coverage for “eligible individuals.” An eligible individual is a citizen, a U.S. national, or an individual who is lawfully present in the United States, who has a pre-existing condition and has not been “covered under creditable coverage” for six months before applying for enrollment.
- The law defines a “qualified high risk pool” as one that:
- Provides “all eligible individuals” health insurance without “any pre-existing condition exclusion” on coverage.
- Guarantees a minimum actuarial value, specifying that the “insurer’s share of the total allowed cost of benefits provided … is not less than 65 percent of such costs.”
- Limits out-of-pocket costs for covered services to no more than $5950 for an individual and twice the amount for family coverage (or an alternative amount specified by the Secretary if necessary to assure that the pool meets the 65 percent medical loss ratio test);
- Assures that premium rating varies only by rating area, tobacco use, whether the coverage is on an individual or family basis, and age. (Age variations are restricted to no more than a four-to-one ratio.)
- Charges participants the standard rate for individual coverage without taking into account any additional costs possibly arising from their health conditions.
- The law terminates the federal high risk insurance pool on January 1, 2014, when the health insurance exchanges begin, and requires the Secretary to “develop procedures to provide for the transition of eligible individuals into “qualified health plans” offered through exchanges.
- The law requires the Secretary to make adjustments to eliminate deficits in any fiscal year she estimates that the “aggregate amounts available for the payment of the expenses of the high risk pool will be less than the actual amount of [pool] expenses.”
- The law provides that the standards governing a federally funded high risk pool shall “supersede any state law or regulation (other than . . . .licensing or . . . . solvency) with respect to qualified high risk pools which are established” under the law.
- The law allows the Secretary to carry out the program either directly or through contracts to “eligible entities,” including states or nonprofit private entities. States that seek to operate a pool must fund risk pools at the same level as the year before the first year of operation under a federal contract.
- The law requires the Secretary to establish “protections against dumping risk by insurers” and to determine “whether health insurance issuers and employment-based health plans have discouraged an individual from remaining enrolled in ‘prior coverage’ based on that individual’s health status.” The law directs the Secretary to develop review criteria for measuring dumping risk, which must include “at least the following circumstances:”
- In the case of insurance obtained either directly from an insurer or under an employer plan, either “the provision of money or other financial consideration for disenrolling.”
- Age-adjusting the premiums to exceed those required under the program.
- Stopping active marketing of certain policies that previously were offering.
- Conditioning the renewal price on the “duration coverage [from] issue or health status are factors that can be considered in determining premiums at renewal.”
- The law directs the Secretary to establish an appeals process to “enable individuals to appeal a determination” and “procedures to protect against waste, fraud and abuse.”
Agency and timeline
The United States Department of Health and Human Services is responsible for implementing and overseeing the high risk insurance pool. The health reform law specifies a 90-day implementation period, but does not provide specific direction regarding the administrative process to be used. HHS therefore has the discretion to use a range of implementation tools such as publishing regulations in the Federal Register with a public notice and comment period, or by other approaches such as posted policy instructions, announcements of funding availability announcements (where applicable), official letters to affected entities (such as letters to state Medicaid agencies) and posted rulings and notices. Agency websites can be regularly checked for updates.
The Secretary of HHS began to solicit state interest on April 2, 2010, through a letter setting forth program elements.
Key Implementation Issues
- For states:
- What options will states have in terms of structuring their pools? The April 2 HHS letter sets forth five options: Operate a new high risk pool alongside a current state high risk pool, establish a new high risk pool (in a state that does not currently have a high risk pool), build upon other existing coverage programs designed to cover high risk individuals, contract with a current HIPAA carrier of last resort or another carrier to provide subsidized coverage for the eligible population, or do nothing, in which case HHS would carry out a coverage program in the state.
- What relationship, if any, will be established between existing state high risk pools (which may use other eligibility criteria) and the federal pool?
- If a state elects to not establish a new pool or a new federally funded pool alongside its own pool, what process will HHS use to establish a pool within the state?
- How the high risk pool will work in states that do not use a high risk pool but already require their insurers to sell health insurance on a “guaranteed issue” basis, meaning that policies must be sold to individuals regardless of underlying health conditions?
- For individuals: What will the application procedures and criteria be? How will individuals be expected to prove their citizenship or legal status, the existence of a pre-existing condition, and the absence of “creditable coverage” within the preceding six months? How will individuals learn about the pool and what types of assistance will they be able to receive at the time of application? What will be the initial enrollment date in a state, that is, when will a program actually be established? Will insurance be affordable to older people who are subject to the four-to-one premium ratio, and, if not, can the federal or state governments make subsidies available? Will plans made available be required to offer a minimum level of benefits?
- For members: What appeals procedures will the Secretary establish so that members can appeal a “determination?” What actions by high risk pool insurers will be considered to be a “determination” for purposes of exercising appeals rights?
- For insurers that participate in a state high risk pool: What procedures will be used to assure that qualification criteria are met both initially and on an ongoing basis? What types of data will insurers be required to submit and will the submission process be to federal or state regulators, or to both? Will the final federal standards include minimum benefit criteria?
- For insurers and employer plans: what types of conduct will be considered risk dumping, and how will the identified circumstances in the law be interpreted and applied? What qualifies as a prohibited type of “financial consideration”? What does it mean to no longer actively market a particular policy? What meaning will be given to the concept of “prior coverage”? How will the Secretary decide if an insurer is impermissibly considering the duration of coverage from issue or health status at the time of renewal? What types of information will employer plans and issuers be required to submit and how will the Secretary monitor the insurance and benefit plan landscape for evidence of such conduct?
- Overall federal management: What process will the Secretary use to assure that in the aggregate expenditures do not exceed available funds? What types of adjustments may be made in the event that spending estimates are exceeded?
Recent Agency Action
Authorized Funding Levels
Congress has authorized and made immediately available five billion dollars to support the program. The CMS actuary estimated that this would last for 2010 and part way into 2011. At that point, the program will need to be cut back.
- CRS Report — Health Insurance: State High Risk Pools
 P.L. 111-148, §2709(e) amending §1253 of the Act. See also March 29 letter from HHS Secretary Sebelius to Karen Ignani, President, America’s Health Insurance Plans.
 Tanya Schwartz, State High Risk Pools: An Overview (Kaiser Family Foundation, 2010) http://www.kff.org/uninsured/upload/8041.pdf (Accessed April 9, 2010).
 The term “creditable coverage” encompasses public and private health insurance as well as coverage under certain other arrangements such as the Indian Health Service. The term is defined in §2701(c) of the Public Health Service Act.
 See Glossary for definition.