Thursday, July 21, 2005

Risky Business, Part 1...

Some 30 states currently have High Risk Pools for those who are considered uninsurable for medical coverage.
And so, you ask?
Well, the Ohio Department of Insurance recently received a rather hefty grant to study whether or not such a plan should be implemented here. In this post, we’ll review how High Risk Pools work in other states, and in Part 2, we’ll look at the results of Ohio’s study.
Currently, if an Ohio resident is uninsurable, there are few choices. If one is a Federally Eligible Individual, or one has been declined for individual medical coverage, there is a state-mandated “Open Enrollment” (guaranteed issue) plan. This plan comes in two flavors: mediocre but expensive, and expensive but mediocre. Your choice. There are also some guaranteed issue/limited benefit plans, and some non-insurance alternatives. None of these are adequate substitutes for real, comprehensive major medical insurance.
An HRP seems like a good solution to this conundrum. For one thing, the plans available in HRP states offer coverages that are comparable to what’s available on the open market, and many offer PPO plans to help bring down the cost of care. Apparently, some also offer prescription drug and maternity benefits, which seem to me to be self-defeating, in that these would help drive that cost back up. Of course, those purchasing insurance through such a mechanism will pay more, but the amount of any surcharge is usually capped at something that approaches a reasonable amount.
One item which seems to be under the radar, but is vitally important to the success or failure of such a plan, is how pre-existing conditions are treated. If there’s no waiting period before such conditions are covered, we’re back to buying insurance in the back of the ambulance on the way to the hospital. But if there is some reasonable (there’s that word again!) period of time that one must be covered before such conditions are eligible, then the system at least has half a chance.
But at what ultimate cost?
According to Communicating for Agriculture, in the 32 states which have HRP’s in place: 181,411 people were enrolled in these plans. Total premiums of $793 million were paid in, while over $1.2 billion in claims were paid out.
It's estimated that the administrative costs of the plans totaled about $75 million, leaving a $540 million deficit. In short, each participant actually costs about $3,000 to insure; their premiums cover about 60%, which means the average monthly premium is about $150. Hmmmm. The remaining 40% shortfall is covered by the states "using various methods" (I.e. taxes or carrier assessments. Or both).
Does this mean that the idea lacks merit? No, I don’t think so. But the figures cited indicate that each state’s pool is (on average) only covering about 5,000 or so people. That doesn’t seem like a rousing success. While the concept of HRP seems valid, I’d be interested in seeing how this really makes a significant dent in the number of uninsureds, which is estimated at about 40 million nationally, or about 800,000 per state.
One other interesting factoid is that a number of HRP states have now expanded their plan options to include HSA’s. As we learned from the HSA/HRA series, this type of plan seems very attractive to those folks currently without coverage. Perhaps this is what’s necessary to make significant inroads.
In Part 2, we look at the results of the study.
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