High-Risk Pools May Need Lower Expectations

By Dan Diamond, California Healthline Contributing Editor

TOPIC ALERT:

There's less than a month before the first major coverage expansion under the health reform law takes effect, when states are slated to begin opening temporary high-risk insurance pools. However, the ramp-up ahead of the pools' launch has emerged as a microcosm of the past year's health debate. Governors have split -- largely along party lines -- over whether their states will participate in the pools, analysts are concerned about the program's unintended consequences and a new report suggests the program's promise outstrips its funding.

Participation in Pools Splits States

State regulators have significant experience with high-risk pools -- the model is three decades old and covers about 200,000 residents in 35 states -- but typically high premiums and long wait lists render the option unreachable for many uninsured residents. Meanwhile, the premiums are not nearly high enough to pay claims, leaving states to typically cover about 40% of the cost.

California's existing pool, the Major Risk Medical Insurance Program, is among the nation's stingiest. The high-risk pool of the nation's most populous state caps insurance benefits at $75,000 and enrollment at 7,100, less than 2% of its uninsured population, compared with more than 15,000 for Oregon's high-risk pool.

The new federally funded pools are intended to run from July 2010 through January 2014, aiming to offer immediate relief to the most uninsurable people with pre-existing conditions before sweeping changes expand health coverage to millions in 2014. States' proposals on how they would administer the pools were due to HHS this week, and the agency is expected to approve those proposals and begin disbursing $5 billion in program funds on July 1. The new pools might work side-by-side with existing state programs or, in some cases, absorb them altogether.

About two-thirds of the states, including California, will participate in the program, although there may be little technical difference in states that opted out of the pools, as the federal government says it will guarantee coverage for residents in those states. Moreover, some smaller states reportedly could benefit from participating in a larger, federal pool, which would spread the risk further. At the same time, the more states that operate their own pools, the less pressure on HHS to oversee the pools.

The decision to opt in or out could be "seen as a reflection of ... support for the health law," PBS notes. Most states that elected not to run their own pools have Republican governors.

Open Questions on Eligibility

Lawmakers have expressed doubts about the 90-day sprint from bill passage to pools' implementation, suggesting that the tight timeline means key questions remain unanswered.

To qualify for the new pools, uninsured residents with pre-existing health conditions must be without insurance for six months and will be required to pay premiums that are similar to those paid in a "standard population" for insurance. However -- with just weeks to go -- HHS has yet to define what qualifies as a pre-existing condition, which could determine eligibility.

Analysts also have concerns over the fate of the nearly 200,000 U.S. residents covered under existing state-run high-risk pools, who might not be eligible for the new program's lower-cost and more-expansive coverage. Because such individuals are currently insured, they would have to drop their coverage for six months to try to qualify for the new pools, which may carry premiums that are 10% to 40% less expensive.

However, patients who need continuous coverage -- like those with cancer -- would be unlikely to take that gamble, says Stephen Finan, senior policy director at the American Cancer Society's Cancer Action Network.

California officials also are urging residents to halt applications to MRMIP and wait for the federal high-risk pool to open.

Fears About Cost

Meanwhile, the pools may cover just a fraction of the intended target population, barring an infusion of new federal funds or a severe cut in benefits.

The $5 billion that legislators set aside to fund the pools is likely insufficient to cover the cost of all U.S. residents who will qualify for the program, according to an analysis by the Center for Studying Health System Change and underwritten by the National Institute for Health Care Reform. Between 5.6 million and seven million U.S. residents with pre-existing conditions could be eligible for the new pools, but just 200,000 of these residents would be able to be covered under existing funds, says Mark Merlis, who authored the analysis.

To cover more residents, Merlis suggests that administrators could strip down the program's benefits, such as offering catastrophic, as opposed to comprehensive, coverage. Congress also may need to revisit funding or the program's structure -- which would be another sign that the high-risk pools, like the reform law's implementation, remains a work in progress.

Here's a look at what else is making news across the nation.

Federal Role

  • The federal government will shoulder almost the entire cost of the Medicaid expansion established in the new health reform law, according to a recent Kaiser Family Foundation study, the Washington Post reports. The findings counter concerns that the expansion would harm states' fiscal health, which some governors and state officials have used to partially justify lawsuits against the overhaul (MacGillis, Washington Post, 5/27).
  • Four health insurance experts will help manage the federal government's overhaul of the private insurance market through the new Office of Consumer Information and Insurance Oversight, established under the health reform law, Kaiser Health News/Washington Post reports. The office this year will try to generate rules to define an "unreasonable" premium increase, establish coverage for people with pre-existing conditions and make sure that health insurers comply with consumer protections. According to KHN/Post, the appointments signify that the health insurance industry will continue to face heightened scrutiny in the midst of Democrats and Republicans seeking to shape public opinion of the overhaul (Appleby, Kaiser Health News/Washington Post, 6/1).

Updates From HHS

  • HHS recently released the "National Action Plan to Improve Health Literacy," which is intended to communicate health information clearly to U.S. residents, CQ HealthBeat reports. The plan seeks to address the problem that most U.S. residents have trouble understanding and using health information available through the media, websites, medicine labels and health providers (Norman, CQ HealthBeat, 5/28).
  • HHS Secretary Kathleen Sebelius on May 27 also urged insurance company executives to control premiums and cooperate with the implementation of the new health reform law, the New York Times reports. Sebelius met with CEOs from WellPoint, Cigna, the BlueCross BlueShield Association, and Health Care Service Corp., which operates some states' BCBS plans (Pear, New York Times, 5/27). Sebelius said the U.S. government plans to closely watch insurers to ensure they treat consumers fairly, Reuters reports. She noted that while states still will regulate premiums under the new reform law, HHS will have the authority to limit rate hikes, review proposed increases and mandate that companies spend a certain portion of premiums on medical costs (Krauskopf, Reuters, 5/27).

On the Hill

  • House Republican leaders last week introduced legislation that would repeal and replace the new health reform law, The Hill reports. Rep. Roy Blunt (R-Mo.) said the bill would replace the overhaul with the alternative health reform plan proposed by Republicans in November 2009. Blunt said U.S. residents will want alternatives once they learn more about Democrats' reform initiatives (Hooper, The Hill, 5/27).

Reform's Impact

  • Despite new laws and political pressure, many restaurants have done little to reduce calories in their menu offerings, according to a report from the Center for Science in the Public Interest, Reuters reports. In an attempt to address rising rates of obesity, the new health reform law mandates that large chain restaurants list calorie counts on their menus. New York City and California have limited trans fats, Reuters reports (Fox, Reuters, 5/25).
  • Hospitalists' affinity for reforming hospital processes and improving patient outcomes makes them "potential leaders" in the implementation of the new health reform law, the New York Times reports. According to the Times, hospitalists are often young, enjoy working in teams and are more comfortable with technology and making decisions regarding cost cutting. In addition, hospitalists have taken on the in-hospital responsibilities of "overburdened" family physicians, and hospitalists' skills will be particularly helpful to hospitals and health systems under the reform law, as facilities face penalties for readmissions, medical errors and inefficiency (Gross, New York Times, 5/26).
  • Nearly three in four employers that offer retiree health benefits intend to participate in the Early Retiree Reinsurance Program, a program authorized under the new health reform law that allocates $5 billion to encourage companies to continue offering early retiree medical coverage, according to a survey released last week by Hewitt Associates, CQ HealthBeat reports. Although the law stipulates that the funding must be spent on medical claims costs, the survey found that two-thirds of companies remain undecided about where to allocate the money and are waiting for more guidance from the government. Meanwhile, 16% of employers said they would use the funds to reduce premiums for themselves and for their employees, while 5% said they would use the money solely to reduce retirees' premiums (Norman, CQ HealthBeat, 5/25).
Jeremy Engdahl-Johnson
With the new early retiree reinsurance program in effect, what do multiemployer plans need to know? Perspective, http:// www.healthcaretownhall .com/?p=2718

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