Insurance Pool to Offer Reduced-Rate Coverage

Published: April 2, 2010 - New York Times

WASHINGTON — In one of its first steps to carry out the new health care law, the Obama administration announced Friday that it was establishing a temporary insurance pool where uninsured people with medical problems could buy coverage at reduced rates.

Kathleen Sebelius, the secretary of health and human services, said the program would “help provide affordable insurance for Americans who have been locked out of the insurance market.”

Federal health officials said the program would be available from late June of this year to Jan. 1, 2014, when private insurers will be required to accept all applicants without varying premiums on account of a person’s medical condition.

Under the new law, Ms. Sebelius can sign contracts with states to operate insurance pools meeting federal standards. The federal government can operate the pool directly or hire a nonprofit organization to run it in any state that does not want to do so.

To qualify for the high-risk pool, a consumer must have a pre-existing condition and must have been uninsured for the six months before filing an application.

Premiums in the new program will be set at “standard rates,” based on the average premiums charged by private insurers for similar coverage in the individual market.

“If I have cancer, my rate cannot vary based on my having cancer,” said Jeanne M. Lambrew, director of the Office of Health Reform at the Department of Health and Human Services.

Ms. Sebelius may establish a minimum set of benefits. The law specifies a limit on out-of-pocket medical costs, which cannot exceed $5,950 a year for an individual in the pool.

Dr. Lambrew said the new program would “build on what works.”

A recent study published by the Kaiser Family Foundation says that 35 states have high-risk pools with enrollment that totaled 200,000 at the end of 2008. States with the largest enrollment include Illinois, Maryland, Minnesota, Oregon, Texas and Wisconsin.

State insurance pools often have waiting periods of three months to a year, during which they will not cover pre-existing conditions like cancer or diabetes.

With some changes, many of the state insurance pools could probably meet the federal criteria.

The Kaiser study, by Professor Karen L. Pollitz of Georgetown University, said: “Currently, state high-risk pools set premiums at a multiple of standard rates, ranging from 125 percent to 200 percent. As a result, pool coverage is often unaffordable for individuals.”

Ms. Sebelius sent letters to governors and state insurance commissioners on Friday asking if they wanted to participate in the new program. The law provides $5 billion to help pay claims for people in the risk pool.

That may not be enough to provide coverage for all the people who want to enroll in the next three years. Ms. Sebelius said the high-risk pool could provide “immediate relief to potentially millions of people.”

“Beyond the minimum statutory requirements,” Ms. Sebelius said, federal officials will give states a large degree of discretion in devising their programs.

State high-risk pools, all of which operate at a loss, paid a total of $1.9 billion in claims in 2008, according to a recent report by the Government Accountability Office, an investigative arm of Congress. The average claims per person totaled $9,437 in that year. Premiums paid by beneficiaries accounted for 54 percent of the money used to operate the existing high-risk pools. Assessments collected from insurance companies accounted for 23 percent of the total, while state general revenues and other taxes accounted for most of the remainder.