Research & Commentary: State High-Risk Pools for Health Insurance

Published May 25, 2017

The current debate over the future of U.S. health care and the Affordable Care Act (ACA) has left many states wondering how they should proceed with their own health care reforms. One primary area of concern is the cost of people with chronic, serious health conditions, which accounts for a large share of the country’s overall health care spending.

In 2011, the most recent year for which statistics are available, “the top 1 percent of health care spenders accounted for 23 percent of overall spending, and the top 20 percent were responsible for 82 percent of the total,” according to Pew Trusts. These numbers are important because the Affordable Care Act requires insurance companies to accept new applicants, even if they have expensive preexisting conditions, a concept called “guaranteed issue.”

One proven solution for covering patients with preexisting conditions is the creation of high-risk pools. High-risk pools are state-created, nonprofit associations that provide comprehensive health insurance benefits for people who have been turned down for coverage in the private health insurance market due to a chronic illness and to those who cannot afford a private market plan due to poor health or who would have restricted coverage.

Risk-pool insurance already exists in 35 states. Prior to the ACA’s passage, high-risk pools covered greater than 222,000 uninsurable people nationwide. The pools are usually operated through a state insurer and administered by a third party, similar to a Blue Cross plan. They are typically managed by an appointed board of directors consisting of members from the insurance industry, medical professionals, and consumer advocates.

Risk-pool insurance generally costs more than more than what could be purchased by a relatively healthy person in the private market and has higher premiums, and they are operated at a loss by the state. High-risk patients with preexisting medical conditions can be very expensive, so the premiums do not fully cover the costs. States cover this difference through assessments on health insurance or other tax or lottery revenue. The premiums are capped by state statues and usually range from 125 percent to 200 percent of the premiums charged for standard coverage.

Curtis Dubay of The Heritage Foundation argues high-risk pools are a good option for states looking to transition away from the ACA. Dubay argues they make high-quality medical care affordable for patients with high-cost conditions, a population that has never as large as many experts have claimed. “In fact, prior to Obamacare, the number of individuals with pre-existing conditions who truly could not obtain health coverage was vastly smaller, and the problem existed only in the individual market,” wrote Dubay. “It is therefore not surprising that, according to the most recent data, only an estimated 134,708 individuals have enrolled in the supplemental federal high-risk pool program since it was created under Obamacare to cover individuals with pre-existing conditions—still less than the 200,000 individuals originally projected to enroll.”

In a Health Care News article, Merrill Matthews of the Institute for Policy Innovation examined state high-risk pools and determined what made certain state pools successful. Matthews found states such as Louisiana, Minnesota, Missouri, Oregon, Utah and Wisconsin had strong high-risk pools because they had kept the premiums in the range of 125 percent to 150 percent of a standard premium. The best performing high-risk pools also made coverage available to people who had been denied coverage by an insurer and did not place caps how many people could participate in the pool.

Embracing high-risk pools and encouraging them to thrive would allow states to abandon guaranteed issue and provide health insurance to a vulnerable population while helping to keep all health care insurance prices down. State legislators should consider implementing or expanding high-risk pools to protect their citizens and encourage a well-functioning health insurance market.

The following documents examine high-risk pools in greater detail.

Research & Commentary: 10 Health Care Reform Options for States–commentary-10-health-care-reform-options-for-states?source=policybot
In this Research & Commentary, Senior Policy Analyst Matthew Glans outlines 10 steps state legislators should take to improve the cost and availability of health care in their states.

Republicans Shouldn’t Fall for Guaranteed Issue Mandate
In this Health Care News article, Merrill Matthews of the Institute for Policy Innovation examines state high-risk pools and determines what made certain state pools successful. “By working with the current state-based high risk pools, Republicans could abandon guaranteed issue while ensuring there is an adequate safety net for those with a preexisting condition, which would help keep private health insurance pools large and more affordable,” wrote Matthews.

High-Risk Pools for Uninsurable Individuals
In this article for the Kaiser Family Foundation, Karen Pollitz reviews the history of high-risk health insurance pools to provide context for some of the potential benefits and challenges. “Nearly four decades of experience with high-risk pools suggests they have the potential to provide health coverage to a substantial number of people with pre-existing conditions. State high-risk pools that existed prior to passage of the ACA covered over 200,000 people at their peak, and the temporary PCIP pool created as part of the ACA covered over 100,000 individuals,” wrote Pollitz.

What are High-Risk Pools?
The Health Care News staff examine high-risk pools, how they work, and how they could provide coverage for the thousands of individuals with preexisting and chronic health problems. “Risk pools are an important mechanism for providing stability in a state’s individual health insurance market. A pool provides a place where high-risk individuals can gain comprehensive coverage and protection against premiums climbing too high. The high-risk policy-holder is moved from the standard rating pool and placed in one designed to accommodate special and expensive care not needed by most of the insured population.”

State Health Care Reform: The Benefits and Limits of ‘Reinsurance’
Edmund Haislmaier, Senior Research Fellow at The Heritage Foundation examines the potential use of reinsurance to make health insurance more affordable.

High-Risk Pools Ease Transition
Michael Cannon of the Cato Institute discusses how high-risk pools can help transition to a system that makes high-quality medical care affordable and secure for patients with high-cost conditions.

After Repeal of Obamacare: Moving to Patient-Centered, Market-Based Health Care
Curtis Dubay of The Heritage Foundation argues the Affordable Care Act has moved American health care in the wrong direction, by eroding the doctor–patient relationship, centralizing control, and increasing health-care-related costs. “True health care reform would empower individuals, with their doctors, to make their own health care decisions free from government interference. Therefore, Obamacare should be stopped and fully repealed. Then Congress and the states should enact patient-centered, market-based reforms that better serve Americans,” wrote Dubay.

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit Health Care News, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database. 

If you have any questions about this issue or The Heartland Institute’s website, contact John Nothdurft, The Heartland Institute’s government relations director, at [email protected] or 312/377-4000.