Presentation on high risk pools with Bernadette Fernandez at the 2011 National Congress on Health Insurance Reform.

1. State and Federal High Risk Pools
Bernadette Fernandez and Mark Newsom
January 20, 2011

2. State High Risk Pools
CRS-2

3. State High Risk Pools
• Majority of states have high risk pools (HRPs)
• Established prior to federal health reform law—PPACA
• Private health insurance options for individuals with
preexisting health conditions
• Difficulties obtaining insurance in the private market
• Compliance with federal law—HIPAA

4. State High Risk Pool Characteristics
Structure
• Typically non-profit entities
• Board administered
• Generally risk bearing
Eligibility
• Experienced denials, coverage exclusions, rate-ups
• Qualifying health condition
• HIPAA eligible
Benefits
• Variety of plan options – generally PPOs and indemnity plans
• High deductibles are common ($1,000 or greater)

5. State High Risk Pool Characteristics
Premiums
• Many states allow rating based on age, sex, and tobacco use
• Almost all states cap premiums – between 150-200% of
standard rates
Sources of Funding
• Assessments on insurers and health care providers
• General revenue
• Federal grants
• Premium collection
• Other

6. Experience of State High Risk Pools
• Enrollment: 208,000 (as of 12/31/09)
• Total claims: $2.07 billion (2009)
• Claims as a percent of premiums – exceeds 100%
in most states

7. Federal Grants to States
Grant Types
• Seed – establish HRP or conduct feasibility studies
• Operational – cover operational expenses
• Bonus – premium subsidies, cost-sharing reductions, eligibility expansion,
more benefits, etc.
Appropriations
• 107TH Congress: $100 million (2003-2004 awards)
• 109th Congress: $100 million (2006-2007 awards)
• 110th Congress: $49 million (2008 awards)
• 111th Congress: $74 million (2009 awards); $55 million (no awards posted)
Required subsidies (2008)
• All but one HRP required subsidies to cover operational costs
• Subsidy requirements: $1.3 - 141.2 million

8. Federal High Risk Pool Program
CRS-8

9. Examples of high risk pool bills in the
111th Congress
• H.Amdt.510 substitute amendment to H.R.3962 (Rep. Boehner)-
would have created high risk pools in states without them and
funded the new and existing pools with $15 billion FY2010-19.
• H.R. 3218 (Rep. Shadegg)-would have established a 50%
federal matching fund for state high risk pools.
• H.R. 4038 (Rep. Camp)-same as H.Amdt. 510.
• H.R. 3962 (Rep. Dingell)-high risk pool provision similar to the
Patient Protection and Affordable Care Act.
• S.1099/H.R.2520 (Sen. Coburn and Rep. Ryan)-high risk pools,
reinsurance markets, or risk adjustment mechanisms to cover
those deemed “uninsurable.”
• S.1796 (Sen. Baucus)-high risk pool provision similar to the
Patient Protection and Affordable Care Act.

10. Pre-Existing Condition Insurance Plan
(PCIP): §1101 of Patient Protection
and Affordable Care Act (PPACA)
• Intended to serve as a bridge to 2014 when
the prohibition on pre-existing condition
exclusions takes full effect.
• Requires the Secretary of Health and
Human Services to establish a temporary
HRP no later than 90 days after enactment
and ending on January 1, 2014.
• The Secretary may carry out the program
by contracting with states or a nonprofit
private entity.
• Appropriates $5 billion.

11. PCIP Eligibility
• Be a citizen or national of the United States
or lawfully present in the United States;
• Not have been covered under creditable
coverage for the previous 6 months; and
• Have a pre-existing condition.

12. PCIP Premium Rating
• Equal a standard rate for a standard
population (not exceed 100% of the
standard non-group rate); and
• Do not vary by age by more than 4 to 1.

13. State Role for PCIP
• Operate a new high risk pool alongside a
current state high risk pool;
• Establish a new high risk pool; or
• Do nothing and HHS operates the PCIP in
that state.

14. Oversight issues
• Enrollment
• Cost
• Premiums
• Eligibility

15. Oversight issue: Enrollment
• 8,011 enrollees as of November 1, 2010.
• Would enrollment be higher if premiums
were lower or subsidized for low-income
individuals?
• Are prospective applicants unaware of the
program?
• Are the eligibility requirements (6-months
uninsured) a barrier?
Source: HHS http://www.healthcare.gov/news/factsheets/pre-existing_condition_insurance_enrollment.html

16. Oversight issue: Cost
• Cost linked to enrollment-“CBO estimated that the
funding available for subsidies would not be sufficient
to cover the costs of all applicants through 2013, so
CBO assumed that HHS would use the authority given
to it under the act to limit enrollment in the program.”
• House Majority concerned about reports of higher than
expected per member claims costs.
Sources: CBO June 21, 2010 letter to Sen. Enzi and House Republican Conference, Obamacare: A budget-busting, job-
killing, health care law, JANUARY 6, 2011.

17. Oversight issue: Premiums
• In 2010, monthly rates for a nonsmoking
50-year-old range from $240 for a $5,000
deductible plan in Utah to $1,006 for a
$1,500 deductible plan in Alaska. In the
federal PCIPs premiums for a 50-year-old
range from $330 in Hawaii to $556 in
Florida, with an average of $455.
• PPACA does not provide for a low-income
premium subsidy for enrollees in PCIPs.

18. Oversight issue: Eligibility
• Is the 6-month uninsured requirement too restrictive?