High-Risk Pools An Ineffective Way of Covering The ‘Uninsurable’

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"High-Risk Pools An Ineffective Way of Covering The ‘Uninsurable’"

mccainhighrisk.jpg An editorial in today’s Washington Times suggests that Sen. John McCain’s (R-AZ) plan to insure Americans who can’t obtain coverage from the individual market in high risk pools is the “most effective way to address the safety-net problem of the uninsurable”:

The best solution is to let the health insurance market work for the vast majority of Americans and create a safety net for those who can’t get coverage. That’s what Mr. McCain’s “Guaranteed Access Plan” (GAP) tries to do…Critics like to discuss the problems facing some state pools rather than honestly acknowledging that several of them – including Maryland, Wisconsin and Illinois – work very well.

McCain argues that “people with pre-existing conditions aren’t always as expensive to insure as private companies think.” If the federal government contributed just $7 billion to $10 billion to state-sponsored high-risk pools, the 56 million “uninsurable” Americans — those Americans with pre-existing conditions who currently receive coverage through the employer-based system but will be unable to find coverage in the individual market — will have health insurance.

But McCain’s proposal both overestimates the effectiveness of high-risk pools in covering the sickest Americans and financially overwhelms public high-risk pool initiatives.

According to a forthcoming report on the implications of McCain’s health reform for people with pre-existing conditions by Stephanie Lewis, high-risk pools “have not been a viable alternative for the medically uninsured because of high premiums…and inadequate funding to subsidize the full cost of providing insurance to a high-cost population.”

Indeed, experts estimate that McCain’s $7 to $10 billion funding boost is “nowhere near enough, [to cover the uninsured] particularly given the large number of people with pre-existing conditions who would need this help if employers send their workers out to the open market”:

The history of high risk pools is one of either inadequate coverage or high costs…only 200,000 Americans are covered by state high risk pools, with health expenditures of $1.6 billion. This means that a similar national program funded at $7 billion per year would cover only 875,000 people. Even if participants had to pay half of their own premiums, as is generally the case today in state high risk pools, less than 2 million Americans would be covered.

Moreover, as the Wonk Room has previously pointed out, high risk pools have many of the same draconian limitations as the unregulated private market: waiting periods, premiums that are out of reach for many families, substantial deductibles and co-pays, and limits on mental health and maternity care. While other states offer even harsher terms, “Maryland, Wisconsin and Illinois” – the very programs that the editorial touts– also exemplify the shortcomings of high-risk pools:

- Maryland: 6 month waiting period for coverage of services related to pre-existing conditions, $500-$1,000 deductibles

- Wisconsin: 6 month waiting period for coverage, $1,000-$5,000 deductibles

- Illinois: 6 month waiting period for coverage, $500-$5,200 deductibles, “Premiums charged are established by law at from 125%-150% of the average rates charged individuals for comparable major medical coverage by five or more of the largest insurance companies in the individual health insurance market in Illinois.

Instead of spreading risk broadly and evenly in diversified insurance pools, McCain’s radical approach to health care policy still leaves many Americans with pre-existing medical conditions without health care coverage.

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