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Note to Health Reformers: All High-Risk Pools are Not Equal March 2010

Note to Health Reformers: All High-Risk Pools are Not Equal

By Courtney Burke and Lynn Blewett

Courtney Burke Lynn Blewett

As Congress completes action to revamp the health care system, it is worth noting that at least one idea backed by Republicans, many Democrats in the House and Senate, and the President himself made it into the final package: high-risk pools for people with expensive or pre-existing medical conditions.

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Courtney Burke is director of the Rockefeller Institute’s Health Policy Research Center. Lynn Blewett is associate professor at the University of Minnesota’s School of Public Health. An earlier version of this commentary appeared on the Health Affairs Blog.

High-risk pools can help hard-to-insure people obtain health insurance by putting them together in one purchasing pool and potentially subsidizing their coverage. The version of health reform legislation that the House of Representatives passed March 21 proposes to support high-risk pools until 2014, when they will be phased out in favor of new rules requiring that insurance companies offer coverage to people with pre-existing conditions.

High-risk pools are not new; 35 states already have them. But just because a lot of states have high-risk pools does not mean all are working well.

Many states currently have waiting lists. Florida has stopped accepting new applicants altogether. Other states — Kansas, Louisiana and New Hampshire, for example — have very limited eligibility criteria and enrollment. Other states’ programs have monthly premiums over $1,000, making it difficult for enrollees to afford the coverage to participate, and not all states offer generous premium subsidies to enrollees. Because of these limits, high-risk pools do not always reach potential target populations.

Should high-risk pools remain part of federal health reforms as a temporary means to assure coverage for people with pre-existing conditions — as we believe they are likely to — then elected officials might want to replicate some features of a pool in a state with relative success: Minnesota.

Minnesota’s high-risk pool, one of the largest and oldest in the country, enrolls about 30,000 people. While that is roughly one-sixth of all persons enrolled in high-risk pools nationally (an impressive amount), it is less than 1 percent of the state’s population. Still, it is viewed as an important safety net for people who might otherwise be deemed “uninsurable” — such as cancer survivors, hemophiliacs or persons with HIV/AIDS. The program primarily provides comprehensive major medical plans for people having trouble obtaining coverage because of a pre-existing condition.

There are at least four reasons why Minnesota’s pool may be more successful than other states’:

First, eligibility is broader than in some states. Anyone who is deemed medically eligible (meaning they have been turned down for private insurance coverage because of a medical condition), HIPAA eligible (meaning a person lost previous coverage and meets other requirements) or eligible under Health Care Tax Credit criteria can enroll in the high-risk pool. Persons are also allowed to enroll under “presumptive eligibility,” meaning they may enter the pool with just a doctor’s diagnosis. Spouses, children and other dependents of enrollees are also eligible to join the pool.

Second, the pool currently is adequately funded, so all those who need insurance and meet the eligibility criteria are covered. It is funded by enrollee premiums and annual assessments on companies that sell insurance policies in Minnesota (i.e., the fully-insured market). At times, the pool has been supported by small state subsidies, including funding from the state’s tobacco-settlement funds. The stability of its funding and the fact that it has not had to rely as much on yearly state budget allocations have helped keep both funding and enrollment steady.

Worth noting is that the current fiscal circumstances of many states may make it difficult to adequately fund high-risk pools to the degree that Minnesota has done. Minnesota’s current revenues, although by no means strong, have been hit less hard than many other states’. Whether Minnesota will be able to maintain adequate funding for the high-risk pool during these tough fiscal times remains to be seen, and states with larger revenue shortfalls and a shorter history of supporting robust high-risk pools will certainly have a harder time expanding the pools to meet a likely increase in demand. Offsetting state revenue shortfalls, however, could be $5 billion in federal funding included in both House and Senate health reform proposals.

A third reason the Minnesota high-risk pool has been relatively successful at reaching its intended target audience is because premiums are low compared to other states’ high-risk pools. Currently, Minnesota’s premiums are capped at 125 percent of the average cost for an individual buying insurance in the private market (and premiums have averaged about 119 percent of the private individual market in recent years). Other states have much higher premium caps, with at least 12 states having caps of 200 percent or more of the standard premium rate in that state’s insurance market, making insurance through the pool unaffordable to many who need it. Keeping insurance affordable also will be a challenge for fiscally strapped states, although it is possible that federal health reform, if passed, will include subsidies to help people purchase insurance.

Minnesota has attempted to make premiums even more affordable by offering a split deductible — one for medical services and one for prescription drugs. Minnesota shares this feature with a handful of other states. It allows people who do not need prescription drug coverage to pay a lower premium. Another way the program has increased affordability is by offering two premium rates: one for tobacco users and another for non-users. This helps encourage healthier behaviors, which could also help to reduce premium costs.

A fourth reason why the Minnesota pool may be more successful is because of its administration. The program is a not-for-profit corporation governed by a board of directors and regulated by the Minnesota Department of Commerce. The board represents a wide range of interests, and includes health care providers, hospitals, employers, insurance carriers, the Department of Commerce and plan enrollees. Other states have similar governance structures, although not all have as much representation from consumers. The administrative structure also includes public oversight and a liberal policyholder appeal process.

Although it is hard to measure, Minnesota’s high-risk pool has likely not only helped otherwise “uninsurable” enrollees but also helped to stabilize the individual and small-group insurance markets by removing high-risk, high-cost patients from their enrollment and premium calculations.

High-risk pools will continue to be an important part of states’ safety nets. Yet funding will be a challenge in many states — including Minnesota, where pool enrollees are aging and requiring more expensive medical treatments. Therefore Congress may want to assist states by providing more funding for this important component of the private health insurance market.

If health reform legislation is to be effective, Congress must spend some time fine-tuning the details of agreed-upon issues. High-risk pools are one of those, and following Minnesota’s lead could be a way to get it done right.


The Nelson A. Rockefeller Institute of Government, the public policy research arm of the State University of New York, conducts fiscal and programmatic research on American state and local governments. It works closely with federal, state, and local government agencies nationally and in New York, and draws on the State University’s rich intellectual resources and on networks of public policy academic experts throughout the country.