NCPA - National Center for Policy Analysis

Tennessee's Costly Help For Higher Income Families

May 1, 2000

Tennessee is one of a number of states that implemented health care reforms modeled on the failed 1993 Clinton health care plan. The TennCare program was designed as a health insurance safety net covering all poor or uninsured residents, but it generously subsidizes middle and upper income families who could afford to purchase insurance themselves.

The most generous subsidies to the well-off come from TennCare's coverage of the state's uninsurable population -- those who are unable to get a health insurance policy because of a pre-existing medical condition.

  • Currently, 27 states have implemented some form of high-risk pool to address the needs of their uninsurables.
  • Typically, people qualify by proving they have been denied a health insurance policy because of a pre-existing medical condition.
  • If accepted into the high-risk pool, they are able to purchase a standard health insurance policy, but usually at a rate of between 25 percent and 50 percent above the cost of a standard policy.
  • The additional premium is for the higher cost of uninsurable people, and perhaps more important, to discourage people from waiting until they get sick to get an insurance policy.

However, TennCare charges only about 22 percent more than standard rates for uninsurables who have incomes above 400 percent of the poverty level. That means an unisurable family with income between $62,400 and $116,800 a year pays about $595 a month in premiums. An unisurable family with an income above $116,800 pays only $18 more a month.

As a result of pricing high-risk insurance too low and making TennCare very easy to enter, about 114,000 people are classified as uninsurable in Tennessee. The uninsurable in all other 27 states with high-risk pools combined amount to slightly more than 100,000 people.

Source: Merril Matthews, Jr., "Lessons From Tennessee's Failed Health Care Reform," Backgrounder No. 1357, April 7, 2000, Heritage Foundation.


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