On July 1st, the new health care law will begin providing temporary health care coverage to Americans who can’t find affordable insurance in the individual health care market through high-risk insurance pools. The law allows states to decide whether they will participate in a new high-risk health-insurance pool, build on an existing program (if they have one), establish a separate state-based high risk pool with federal funding or do nothing at all, in which case the federal government would come in and administer the program.
At least 35 states are already operating their own high-risk pools but states that choose to build off their existing programs will have to meet new federal requirements. High-risk insurance pools will not be able to impose preexisting condition exclusions, will have to keep their premiums at “standard rates” (or no higher than the average person of that age would pay for insurance in the private market), limit on out-of-pocket medical costs to $5,950 a year for an individual, and insurers will have to maintain an actuarial value of at least 65%. Issuers will also be prohibited from varying premiums on the basis of age by a factor greater than 4 to 1.
Last month Kathleen Sebelius wrote states to ask how they plan to implement the high-risk insurance pool provision and on Friday, most of the states responded:
The states that opted out of the program complained that the $5 billion in federal dollars would not be enough to fully fund their pools and said that they could not cover the uninsured with state funds. “We cannot afford to expose Minnesota taxpayers to added potential costs and administrative burdens now,” Minnesota Gov. Tim Pawlenty (R), said. “Unfortunately Florida is not in a position to authorize new financial obligations,” Gov. Charlie Crist (I-FL) added. Their complaints highlight two important contradictions. First, if the states can’t find enough dollars to cover the uninsured for three and a half years, how in the world would they have enough money to develop reform on a state level, as Republicans argue they should? Second, POLITICO notes that the decision came down across party lines — Democrats agreed to establish state-pools using federal dollars, while “Most Republican governors decided to allow the federal government to establish its own high-risk insurance pool in their states, essentially punting.” But as I’ve pointed out before, this too is counter-intuitive. Republicans are relying on the federal government to cover the uninsurable population, helping bring about the very thing they fear — greater government involvement in the health care sector — while Democrats are employing state-based solutions.
Moreover, the idea of the high-risk pool was first proposed by then-presidential candidate John McCain, who believed that he could cover everyone with a pre-existing condition for just $10 billion. Conservative organizations like the Heritage Foundation supported the idea, but Democrats saw it as an incredibly inefficient way of expanding coverage. Now that Obama has accepted the idea into health reform, Republicans are taking their swings and opting out of McCain’s idea.
(Map designed by Nick McClellan.)