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Health insurance and high-risk pools

Federal pool and state-sponsored programs

  • By
  • contributor
  • August 12, 2015

One of the goals of the Affordable Care Act was to make health insurance available to nearly all Americans, including those with pre-existing conditions. Although group health insurance has long been guaranteed issue for eligible employees, people who purchased their own health insurance prior to 2014 had to go through a medical underwriting process that has historically resulted in roughly 20 percent of individual health insurance applications being denied.

In order to offer a viable alternative for these applicants, 35 states established their own high risk pools (mostly in the 1990s), generally supported by a combination of state funds, enrollee premiums, and fees assessed on private health insurance carriers.

In addition to those plans, the ACA included a provision for the Pre-Existing Condition Insurance Plan (PCIP), which created a new state or federally run high-risk pool in every state to make a bridge to 2014 and guaranteed issue health insurance. The ACA was signed into law in March of 2010, and at that point, the requirement – starting January 2014 – that all policies be guaranteed issue was still nearly four years in the future.

Now that the consumer protections in the ACA have been fully implemented, risk pools are no longer necessary the way they were in the past. Health insurance applications are no longer denied because of medical history, and people are no longer offered policies with increased premiums or exclusions based on pre-existing conditions.

HHS announced in March 2014 that PCIP insureds could keep their coverage until April 30,2014 if they had not yet enrolled in an exchange plan. (Total PCIP enrollment had dropped to around 30,000 people by January 2014, down from about 85,000 three months earlier. The majority of PCIP insureds had already transitioned to a new plan).

All PCIP coverage ended on April 30, 2014. Enrollees in those plans were able to transition to exchange plans during open enrollment, and they also had another 60-day special enrollment period that began on May 1 if they were still insured by a PCIP policy that terminated at the end of April (involuntary loss of coverage is a qualifying event that triggers a special enrollment period). By the end of June, that special enrollment period had closed, although it’s highly likely that almost all of the remaining PCIP members were able to transition to a new ACA-compliant plan by the end of June 2014.

But what about the 35 state-run risk pools that pre-dated the ACA? Many of them have also ceased operations or closed their pools to new applicants, but it varies from one state to another. This chart shows the 17 plans that ended coverage in the first half of 2014, along with the 18 state risk pools that were still operational for at least some existing enrollees as of mid-2014 – and some of them were still accepting new members as well.

The following states have risk pools that remain operational as of mid-2015. Some of them are still accepting new members, although enrollees would obviously have to meet the existing eligibility guidelines:

  • Alaska (2015 rates)
  • California (coverage still has lifetime and annual benefit maximums, so enrollees may be subject to the ACA’s penalty for not maintaining minimum essential coverage)
  • Connecticut (new enrollment ceased as of December 31, 2013, and existing risk pool coverage does not meet minimum essential coverage requirements as of 2015)
  • Idaho
  • Illinois
  • Iowa (2015 rates)
  • Mississippi
  • New Mexico (in March 2015, the NM exchange board discussed transitioning existing insureds to the exchange, and the risk pool board also addressed the issue during a June meeting)
  • North Dakota (legislation enacted in 2015 that allows the risk pool board to modify coverage if HHS determines that existing coverage does not meet minimum essential coverage requirements; provisions of the 2015 legislation are valid through July 31, 2017).
  • South Carolina
  • Tennessee (closed to new enrollees)
  • Washington (non-Medicare coverage will terminate at the end of 2017; as of January 2014, new enrollments in non-Medicare coverage are only permitted if there is no ACA-compliant individual market plan available in the applicant’s county)
  • Wyoming (2015 legislation gave the insurance commissioner authority to disenroll risk pool insureds as long as they have “reasonable access to health insurance.” The legislation also extends the sunset date for the risk pool out to 2020, as the pool provides Medicare supplemental coverage for people who can’t obtain it in the underwritten market).

Bridging the gap

The ACA’s temporary Pre-Existing Condition Insurance Plans (PCIP) were initially run by state governments in 27 states and by the federal government in 23 states and the District of Columbia. By July 2013, 17 states that had been operating their own PCIP had turned their plans over to the federal government. New-member enrollment ceased in early 2013, and all PCIP coverage ended on April 30, 2014.

The PCIP program was well-intentioned but struggled financially from the outset, with lower enrollment and higher costs than originally projected. In order to help keep the program afloat as long as possible, HHS made some changes along the way.

In 2011, eligibility requirements were eased in order to increase enrollment. Premiums were also lowered by up to 40 percent in 18 states where the PCIP is administered by the federal government, to bring the premiums closer to the rates in each state’s individual health insurance market.

In the face of higher-than-expected costs, however, the government increased enrollees’ maximum out-of-pocket annual expenses for 2013 from $4,000 to $6,250. The rate increase took effect January 1, and applies to plans administered by the federal government, which impacts enrollees in 40 states and the District of Columbia.

Risk pools by the numbers

Roughly 135,000 people enrolled in PCIP plans nationwide between 2010 and 2013. To qualify, people had to have been without health insurance for at least six months and must have a pre-existing health condition or have been denied coverage as a result of a health condition.

The PCIP program’s high cost has been attributed in part to the fact that the population served is disproportionately older. More than seven in 10 people enrolled are age 45 and above.

Nearly four in ten claims paid in 2012 were for one of four diagnoses: cancers, ischemic heart disease, degenerative bone diseases, and the follow-up medical care required after major surgery or cancer treatments. In 2012, the average cost per person was $32,108. However, just 4.4 percent of enrollees averaged costs of $225,000 accounting for more than half of all claims paid.

Now that PCIP enrollees have transitioned to the private marketplace (either on or off-exchange) or to Medicaid, their medical expenses are being pooled with a much larger group of people, including healthy insureds. This helps to spread the costs over a larger population and better manage the health care costs of the sicker individuals who were covered by PCIP policies between 2010 and 2014.