Managing Editor’s note: In August 2001, a report titled “Insuring the Uninsurable: An Overview of State High-Risk Health Insurance Pools,” written by Lori Achman and Deborah Chollet of Mathematica Policy Research, Inc., was produced under a grant funded by The Commonwealth Fund.
The following is a summary of a well-documented 10-page rebuttal of the report by Bruce Abbe, vice president of public affairs for Communicating for Agriculture (CA). Abbe is editor of CA’s annual directory on risk pools, “Comprehensive Health Insurance for High Risk Individuals—A State-By-State Analysis.”
According to “Insuring the Uninsurable: An Overview of State High-Risk Insurance Pools,” by Loric Achman and Deborah Chollet, state high-risk pools tend to have premiums that are too high, benefits that are too limited, aren’t sufficiently promoted, and serve only a small fraction of the high-risk population.
The report, produced with funding from The Commonwealth Fund, often sought to use selective information about one or two state programs to paint negative conclusions about the state risk pool system as a whole. The authors frequently criticized risk pools for what are essentially normal benefits and characteristics of the individual health insurance market—of which these programs are a part.
The board of directors of the National Association of State Comprehensive Health Insurance Plans (NASCHIP) recently distanced itself from the report. “The NASCHIP board of directors did not participate in the drafting of the Commonwealth study, nor does it concur with the opinions expressed by the authors, nor does it believe its conclusions are born out by the facts.”
The rest of this article quotes the study’s major findings, followed by rebuttals based on the comments of risk pool program officials contacted by the author.
- The Executive Summary of the report claims “Some pools have long waiting lists, and some are closed to new applicants all together.”
In fact, 25 operating state programs are open year-around and are accepting new enrollees. Only one is closed, and it has been for 10 years. Only two, California and Louisiana, currently have waiting lists for new enrollees as they wait for their legislatures to provide additional funding or make other changes. Illinois recently had a waiting list for a short period of time, but no longer does. It is absolutely wrong to imply that state risk pools commonly have waiting lists or are closed.
- In a news released dated August 10, 2001, Commonwealth claimed “… the existence of these pools are [sic] rarely publicized.”
Nearly all states with risk pools require insurance carriers, when they deny an individual coverage, to inform that individual about the existence of the state pool and his/her ability to get coverage there. All pools and state insurance departments provide information to agents and brokers as part of ongoing informational efforts. Pools have done public service announcements and public information programs.
- The report claims “Many of the programs have high deductibles and co-payments … and often restrict annual and lifetime benefits.”
That is a very deceptive statement. Virtually all of the risk pools provide comprehensive major medical benefits and plans comparable to what is widely viewed as regular quality coverage in the individual market. 80/20 coverage (20 percent co-pay, sometimes more if out of network) is the norm for nearly all risk pools, and it’s the norm for individual market coverage.
Every risk pool offers a deductible of $1,000 or less, and 19 offer deductible options of $500 or less. Many of the pools also offer higher deductible plans. At one point, the study notes deductibles range up to $10,000, and out-of-pocket stop loss limits are $2,000 to $2,500 (again normal) but can range as high as $10,000.
Alaska’s HIP has a $10,000 deductible option. But it also offers $500, $1,000, $1,500, $2,500, and $5,000 deductible options. Alaska also has a $10,000 stop loss limit—but only on the $10,000 deductible plan, which means all costs are covered after that deductible.
On December 31, 2000, the Alaska HIP had 395 policy holders. Of those, 31 had the $500 deductible, while 25 had the $10,000. It’s clear the Commonwealth report’s authors did not paint a full, accurate picture.
- The Commonwealth report says state risk pools “often restrict annual and lifetime benefits.”
In fact, 20 of the state HIPs offer lifetime maximum benefits of $1 million or more. Once again, $1 million lifetime maximums are normal. In a couple of instances there is no limit, but that is rare in the individual market. Some of the HIPs are at $2 million, and one is at $1.5 million. Six have $500,000 lifetime maximum benefits.
One state, Wyoming, offers a plan with a $350,000 lifetime maximum, adopted to protect the small state and risk pool from the impact of one major hit. But Wyoming also offers another plan with a $600,000 lifetime maximum.
At a roundtable discussion among state pool directors attending the October 5, 2001 NASCHIP annual meeting in Omaha, Nebraska, the representatives were asked if they knew how many individuals had hit their lifetime maximums over the life of their programs. Of the 17 states represented at that particular session, the group collectively identified 18 individuals who had hit their lifetime maximums. The risk pool officials represented plans that, in some cases, had been existence for nearly 25 years.
Several of the pool directors at the meeting noted some individuals (also a small number) come from the group market to the pools because they’ve max’ed out on the lifetime benefits in their employer group. Lifetime maximums are common in health insurance, and the fact state HIPs have lifetime maximums is hardly a fair criticism.
- The Commonwealth authors note “High-risk pools often require waiting periods for people with pre-existing conditions, despite the fact that they were designed to help individuals with serious or chronic illness obtain health insurance.”
For people coming into the programs uninsured, all high-risk pools have waiting periods for pre-existing conditions. This is normal practice for the individual health insurance market. For individuals previously insured under other health plans, nearly all of the pools apply creditable coverage.
Waiting periods for coverage of a pre-existing condition treated in recent months (but no waiting period for coverage of other health care services) are a normal part of individual health insurance. Even New York, a guaranteed-issue state with many mandates and regulations, has a 12-month waiting period with a six-month look back for pre-existing conditions.
It is simply wrong for the authors to imply that by having waiting periods for pre-existing conditions risk pools provide poorer-than-normal coverage.
- The report faults state risk pools for charging premiums that are high relative to incomes.
There is some truth, but also many mischaracterizations and omissions, in the Commonwealth report’s conclusions on this issue.
The authors estimated average premium costs for a select group of risk pools and compared those averages to median household income. It is difficult to judge the accuracy of the average estimates, since the report’s authors don’t explain in detail how they arrived at them. State risk pools charge a wide range of premiums, varying from state to state and by age, geographic area, and the details of the plans offered.
At no point did the study compare risk pool premiums with comparable coverage in the individual market—certainly a more apples-to-apples comparison of how risk pool costs vary from what would otherwise be available in the commercial market. And no comparison was made with individual market coverage in the guaranteed-issue states. Several risk pools, serving even their small populations, have lower rates than what everyone, healthy or not, is charged for some guaranteed-issue plans.
The Commonwealth study found that the overall average premium among the sample risk pools was $3,083. By comparison, the Kaiser Family Foundation recently released the results of a survey that found employer-sponsored group insurance costs have gone up and average $2,652 for individuals ($7,056 for families). And that’s for group coverage, normally significantly less expensive than individual coverage. That suggests risk pool coverage is not all that expensive.
It is true, however, that risk pool premiums vary significantly from state to state, depending upon how the legislatures, boards of directors, and other policy makers designed the program. Some pools are comparatively affordable, and those do generate more enrollment than pools that are more expensive. That’s what policymakers do: Make choices, balancing costs against benefits.
- The Commonwealth report also chastises risk pools because “enrollment rates are extremely low.”
It’s important to remember that risk pools are not designed or intended to solve the uninsured problem. That is widely and accurately seen as a socio-economic issue, not an insurance issue. Risk pools are first and foremost designed to address access, in a particular market segment of the health insurance industry where the problem is inherently more acute.
The report estimated that risk pool total enrollment amounted to about 1.2 percent on average of the individual market in the states with risk pools, based on estimates that the individual market serves about 7 percent of the overall national population under age 65.
State risk pools in Minnesota, at 6 percent, and Nebraska, at 3 percent, had the highest percentage of individual market enrollment. The rest were under 2 percent.
The fact is, the number of potential enrollees in state high-risk pools simply is a small number. Estimates of the number of risk pool-eligible people in any state or the country are extremely speculative. A study of Minnesota’s large and relatively affordable state risk pool (currently serving 26,000+ individuals) concluded it had served in the neighborhood of 250,000 people at one time or another since it started operation in 1977.
It’s commonly thought that perhaps 1 percent of the overall insurance market would be considered “uninsurable,” or denied health insurance due to a preexisting condition. But little reliable research underpins that or any other such estimate.
The term “uninsurable,” in fact, is considered a misnomer in many risk pool circles. Everyone is insurable, they argue; it’s just a matter of developing a way to insure them that does more good than harm. That’s what risk pools are all about.
Risk pools are designed to serve a small portion of the market; that’s their purpose.
If you read the Commonwealth report and came away with the impression that all risk pools are too costly, have poor benefits, and are frequently closed for new enrollment, it’s understandable that you did. That’s what the authors wanted you to think.
But a closer look at the facts shows those conclusions are just not so.
Bruce Abbe, vice president of public affairs for Communicating for Agriculture, is editor of CA’s annual directory on risk pools. He is also a member of the board of directors of the National Association of State Comprehensive Health Insurance Plans. He is based at CA’s public affairs office in Bloomington, Minnesota.
For more information . . .
The full text of Bruce Abbe’s “Response to the Commonwealth Study on Risk Pools: State Health Insurance Pools for the High-Risk Population – 25 Years of Proven Service in Guaranteeing Access to Coverage” is available free of charge through PolicyBot, The Heartland Institute’s online research service. Point your Web browser to www.heartland.org, click on the PolicyBot icon, and search for document #3236702.
The full text of the Commonwealth Study is also available through PolicyBot. Search for document #3237601.