Health Insurance: Enrollment, Benefits, Funding, and Other Characteristics of State High-Risk Health Insurance Pools

A growing number of states–35 as of June 2009–have created high-risk health insurance pools (HRPs) primarily to provide coverage to individuals whose health status limits their access to coverage in the private individual health insurance market. HRPs–typically state-run nonprofit associations–often contract with a private health insurance carrier to administer the pool and offer a range of health plan options to such individuals, who are commonly referred to as medically uninsurable. Plan options vary within pools and from state to state, and like the private individual market, HRPs typically impose waiting periods for coverage of preexisting conditions to discourage medically uninsurable individuals from foregoing health insurance until they require care. Because of the higher health care costs typically incurred by medically uninsurable individuals, all pools operate at a loss. Premiums for HRP health plans are higher than for plans offered to healthy individuals in the private health insurance market; however, these premiums are capped to limit enrollees’ costs and are thus insufficient to cover the costs of enrollee health care claims. As a result, all HRPs supplement their revenues through various funding mechanisms, such as assessments on health insurance carriers and state general revenues. Federal grants are also awarded to establish and fund HRPs. As part of the Trade Adjustment and Assistance Reform Act of 2002, Congress established a program to provide grants to HRPs to offset losses and establish HRPs–commonly referred to as operational and seed grants, respectively. Subsequent legislation authorized funding for the program through 2010, including grants to be used for supplemental consumer benefits–commonly referred as bonus grants. Since 2003, the grant program has awarded nearly $286 million to state HRPs for various purposes. The Centers for Medicare & Medicaid Services (CMS), withiDepartment of Health and Human Services (HHS), administers this federal grant program. Recent health care reform proposals call for an expanded role for HRPs to enhance health insurance options for the medically uninsurable. Because of the federal funding provided to HRPs, you expressed interest in obtaining data on several aspects of each state HRP. In this report, we describe (1) HRP enrollment and enrollee demographics; (2) HRP plans’ cost-sharing provisions, coverage restrictions, and premiums, and comparable information for certain private market health plans; and (3) HRPs’ governance, expenditures, and funding.

HRP enrollment–enrollees and their dependents–totaled 199,418 in the 34 HRPs in 2008. We estimated nearly 4 million additional individuals to be potentially eligible for enrollment in an HRP based on their uninsured status and preexisting health conditions. In 2008, the average annual deductible for the most popular plan offered by each of the 34 HRPs was $1,593–almost three times as high as the average annual deductible of $560 among employer-sponsored health insurance plans. About 63 percent of enrollees in these most popular HRP plans had deductibles of $1,000 or greater. In comparison, almost 88 percent of enrollees in employer-sponsored plans had a deductible of under $1,000 or no deductible. Collectively, in 2008, HRP governing boards included representatives from health insurance carriers (41 percent of board members), state government (13 percent), medical providers (9 percent), enrollees (7 percent), and employers (3 percent), among others. Total claims paid by HRPs in 2008 were about $1.9 billion, accounting for almost 95 percent of total HRP expenditures. The average claims per enrolled individual totaled $9,437 in 2008, an increase of about 39 percent since 2003. In 2008, premium revenue contributed 54 percent of HRP funding, and insurance carrier assessments contributed about 23 percent.