Congressional Health Care Briefing Book |
Insuring the Uninsurable
"Less than 1 percent of the population has been denied health insurance because of a preexisting condition."
"Risk pools could insure the uninsurable for less than one-tenth of 1 percent of the nation's health care bill." |
One problem with our health care system is that many sick people who lose their health insurance find it impossible to purchase new coverage. Insurers may classify them as uninsurable, offer them a policy that excludes payment for medical services for their preexisting conditions or set their risk-rated premium so high they cannot afford it. To solve this problem, a number of states make subsidized insurance available through high-risk pools to people who can't purchase conventional coverage for a reasonable price. These states are directly solving the problems of the unfortunate few without imposing costly regulations on everyone else. How big is the problem? According to the Agency for Health Care Policy and Research, a branch of the Public Health Service, only 0.7 percent of the U.S. population (about 2 million people) has been denied health insurance due to a medical condition. And while we do not know how many people must pay excessively high health insurance premiums, it could not be very many. Only about 3 percent of the population say they are in fair or poor health. Solving the Problem With High-Risk Pools. Currently, 28 states have passed legislation creating high-risk pools that sell health insurance to approximately 100,000 individuals with preexisting conditions. In most states, the premium for risk pool insurance is between 25 and 50 percent higher than for comparable policies a healthy person can buy. Most risk pool insurance provides benefits comparable to those offered by traditional health insurance policies within the state. Major insurers such as Blue Cross usually manage and underwrite the risk pool. Almost all pools offer fee-for-service insurance, which gives people free choice of doctors, rather than managed care or health maintenance organizations. To join a risk pool in most states, individuals must prove they have been rejected by at least one of the state's insurers. Moreover, to discourage people from waiting until they are sick to get insurance, most of the pools can impose a preexisting condition exclusion period on individuals who enter the pool. Case Study: Nebraska. Nebraska instituted its risk pool, the Comprehensive Health Insurance Pool, in 1985. Any resident who has been denied health insurance within the last six months can join the program for 135 percent of the cost of a standard major medical policy (based on the average cost of the state's five most popular plans). Currently:
Individuals who have lost their insurance and cannot obtain coverage elsewhere can join the pool and be covered immediately. To stop people from signing up for the pool only when they get sick, those who have let their insurance lapse or were not previously covered may have to wait six months before coverage begins. Making Risk Pools Work Better. The biggest problem with risk pools is that they are sometimes underfunded. Texas, an extreme case, has had a risk pool on the books since 1989 but has never funded it. At least one state excludes certain medical conditions from coverage. And some states exclude people from coverage if they have reached the lifetime benefit provided by the plan. Yet the amount of money needed to fully fund state risk pools is almost trivial in the context of a one trillion dollar health care system. Other changes are also needed. While increases may be small, the practice of subsidizing risk pools with a tax on other premiums drives up the cost of insurance for healthy people and could encourage them to become uninsured. Similarly, subsidizing risk pools with a tax on hospital revenues imposes a tax on the general public only to the degree they get sick. A better solution would be to follow the example of California, Illinois and Utah -- fund risk pool subsidies from general revenues and keep hospital fees and other health insurance premiums as low as possible. Extending Risk Pools Nationwide. One study found that extending risk pool insurance nationwide would have cost only $300 million in 1989, out of a national health care bill of $604 billion that year. The study concluded that with aggressive cost control techniques, that number could be significantly reduced. But even without cost control, the cost of solving the problems of risk pool insurance would be less than one-tenth of 1 percent of the nation's annual health care bill. Regulating health insurance premiums -- as most health care reform proposals attempt to do -- would only result in higher health insurance premiums and fewer people being insured. Risk pools, by contrast, would keep premiums low for most people while helping the others obtain affordable health insurance. Solutions for the uninsurable do not require the destruction of the market for health insurance. Properly established, risk pools can meet the needs of those who have been denied health insurance, while allowing the free market to work for everyone else. Other Reforms. Further reforms would encourage people to become continuously insured, making risk pools unnecessary, For example:
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