High-Risk Pools

At Issue

Since in most states, individual health insurance is not offered on a guaranteed-issue basis, people can be turned down for coverage if they have a very serious medical condition (i.e, HIV, cancer). States are not required to have an alternative option for medically uninsurable individuals, but most states do. Thirty-three states provide coverage to medically uninsurable people through high-risk health insurance pools. These pools serve a small but very critical portion of a state's population. Pools provide an important safety net for people with catastrophic medical conditions who do not have access to employer-based group health insurance, such as early retirees, self-employed individuals, and employees of business that do not offer health insurance coverage. In addition, in most states, high-risk pools serve as the guaranteed-issue purchasing option for individuals who wish to exercise their federal group-to-individual health insurance portability rights as provided by the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA). And in many states with pools, the high-risk pool also is available as a purchasing option for individuals who are eligible for the 65 percent federal health insurance tax credit as provided by the federal Trade Adjustment Assistance Act of 2002.

The type of coverage available to risk pool members in most states mirrors what is generally available in the traditional private individual health insurance market in a state. Coverage is generally a comprehensive major medical plan, with a range of deductibles offered to consumers. The most common risk-pool product offered is a PPO plan, but many states also offer indemnity coverage through the risk pool and some states have HMO and/or HSA options available to consumers. Just like almost all individual health insurance policies, high-risk pool policies contain a preexisting condition waiting periods to prevent against adverse selection, and nearly all pools give consumers credit against these waiting periods for prior creditable coverage. Pools offer consumers coverage of prescription drugs, maternity and mental health and substance abuse, among other services, and many have excellent disease management programs for enrollees, since so many pools serve people with severe chronic illnesses.

Risk pool consumers are charged slightly more for coverage than the average individual market consumers. This is fair since pool members by definition are those who are considered to be medically uninsurable. However, state laws caps risk pool rates, generally between 125-150 percent of the base individual market rate. So, for example, if the average standard individual market base rate for a 30-year old male was $100 monthly, in most states with a risk-pool, a medically uninsurable male of the same age would pay between $125-$150 per month for comprehensive private coverage. Risk pool rates for individuals of a variety of ages are fairly affordable nationwide and rates are directly tied to the rates in each state's existing individual market.

Even though risk pool consumers pay premiums, surveys of high-risk pool directors in the 33 states that have created them have shown that risk-pool premiums are never sufficient to pay all pool claims, since risk pool rates are capped and pool participants all have catastrophic medical conditions. Therefore, each of the states with high-risk pools has established some type of funding mechanism to cover pool losses. State funding sources for high-risk pools range from legislative appropriations to tobacco settlement funds to hospital use surcharges. In the past, legislation provided for federal assistance to state-level high-risk pools to help offset costs, and there are currently measures pending before Congress to restore federal funding assistance to state-level high-risk pools.

Recent Legislative Action

The federal Trade Adjustment Assistance Act of 2002 contained federal funding provisions for state-level high-risk pools. The legislation provided seed money to help states that currently do not have qualified risk pools to create them, and dedicated federal funds to help offset the losses of existing risk pools during FY 2003 and FY 2004. The existence of federal funds for high-risk pools led many states to take action to create new risk pools or strengthen the structure of existing pools. However, federal seed money for state high-risk pools expired at the end of FY 2004.

On February 3, 2005, Senators Judd Gregg (R-NH) and Max Baucus (D-MT) introduced S. 288 - State High Risk Pool Funding Extension Act of 2005 to extend federal funding for the operation of state high-risk health insurance pools. This bill passed from committee but has not yet moved to the Senate floor.

On July 12, 2005, Congressman John Shadegg (R-AZ) introduced H.R. 3204 to expand federal funding to high-risk pools. It passed the U.S. House of Representatives on July 27, 2005 and was referred to the U.S. Senate.

NAHU's Position

NAHU believes that the development of a health insurance high-risk pool is the best way a state can ensure that individuals suffering from catastrophic medical conditions always have access to high-quality affordable private health insurance coverage, while still preserving the viability and competitiveness of the state's traditional individual health insurance market. NAHU strongly believes that federal funding for high-risk pools should be made permanent to ensure stability in state-level individual and small group health insurance markets.

• NAHU High-Risk Pool Issue Summary

NAHU Resources

Elements of a Successful High-Risk Pool
National Association of Health Underwriters

High-Risk Pools and the Trade Adjustment Assistance Act
Hey, Wait a Minute - National Association of Health Underwriters.

Overview of High-Risk Pool Funding Options
National Association of Health Underwriters.

Overview of Recent State-Elected Options to Fund State High-Risk Health Insurance Pools
National Association of Health Underwriters - May 2004

Funding of High-Risk Health Insurance Pools Through A Per-Head Assessment on Health Insurance Carriers
National Association of Health Underwriters - September 2002.

States with Programs for the Medically Uninsurable
Excluding State High-Risk Health Insurance Pools - National Association of Health Underwriters - May 2004

Additional Resources

National Association of Comprehensive Health Insurance Plans
(NASCHIP) - The professional association for state high-risk pool administrators

CA for the Self-Employed
This association of self-employed individuals produces the Comprehensive Health Insurance for High-Risk Individuals: A State-By-State Analysis on an annual basis.

HHS: U.S. Department Of Health and Human Services

• Announcement of Availability of Seed Grants to States to Create Qualified High-Risk Pools
  U.S. Department of Health and Human Services.
• HHS to Help States Create High-Risk Pools To Increase Access To Health Coverage
  U.S. Department of Health and Human Services Press Release - November 26, 2002.
• High-Risk Pool Regulation: Grants to States for Operation of Qualified High-Risk Pools
  U.S. Department of Health and Human Services - May 2, 2003

For more information, please contact Jessica Waltman .

Content copyright © 1998-2010 National Association of Health Underwriters. All rights reserved.
National Association of Health Underwriters · 2000 North 14th Street, Suite 450 · Arlington, VA 22201
703.276.0220 · fax 703.841.7797 · info@nahu.org