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High Anxiety: The States Get Nervous About High-Risk Health Insurance Pools

One drawback of the Patient Protection Act is that most of its reforms won't take effect until 2014. For the next three-and-a-half years, for example, adults can still be denied coverage because of preexisting health conditions. To help sick people who can't find insurance in the individual market, the reform law dedicates $5 billion to helping states create high-risk pools or strengthen existing ones so that more of the uninsured with preexisting conditions can buy coverage. But some states are leery of participating in the program, which starts June 21, because they fear that they'll be liable for financing these high-risk pools after the federal funds are gone.

So far, only two states, Georgia and Louisiana, have announced they won't participate, and Republicans govern both of those states. But other states are also eying the pot of federal money anxiously, wondering whether it's a fool's bargain. So this is not just a political issue.

It will be clearer where the states stand on Friday (April 30), the deadline for them to declare whether they want to expand existing high-risk pools, create new ones, build on other programs designed to cover high-risk individuals, contract with "insurers of last resort" (usually Blues plans), or do nothing. If they choose the latter course, Uncle Sam will offer some kind of insurance program to the high-risk uninsured in those states.

Thirty-four states now operate high-risk pools, which have been around since 1976. Yet less than 200,000 people buy insurance through the pools -- a small percentage of the uninsured with chronic illnesses. The reasons are obvious: coverage is expensive, the waiting time is long, and benefits are limited in most states. The medically uninsurable pay 25 to 50 percent more for coverage in the high-risk pools than they would in the individual market, if they could find coverage there.

The government aims to help states bring down those high premiums so more people can obtain insurance, while establishing a minimum level of benefits. HHS Secretary Kathleen Sebelius has yet to specify what those benefits will be. But health plans will have to cover 65 percent of their cost, and the premiums cannot be based on a person's health status, although they can vary by age, geographic area, family composition, and tobacco use. There will be out of pocket spending limits (excluding premiums) of $5,950 for individuals and $11,900 for families. The special high-risk pools will be eliminated in 2014, when individuals will be able to join the new health insurance exchanges.

So here's the rub: With the information they now have in hand, it's impossible for states to tell how much it will cost to subsidize coverage in the high-risk pools. The feds have promised to bear the extra financial burden, but $5 billion isn't a lot of money for a program that's supposed to last for almost four years. If more people than expected apply to the pools, the funds would be used up faster, and the states would be on the hook unless Congress appropriated more money.

Of course, it's easy to accuse Congress of being shortsighted; but in the battle royal waged over healthcare reform, every dollar had to be justified. Still, if the federal government spelled out the details of the high-risk pools, it would be easier to assure the states that they won't get left high and dry.

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