In High-Risk Insurance, Enrollment Lags and Costs Soar

One of the most popular provisions of the Affordable Care Act — cheap insurance plans for people with medical conditions that prevent them from getting coverage anywhere else — has run into a couple of snags. Though nearly everyone agrees a lifeline for sick people is needed, these new so-called high-risk insurance plans have attracted fewer than 50,000 — far less than the 375,000 Congress anticipated. At the same time, the costs of health care services for each member are more than twice as much as projected.

According to a new report from the U.S. Department of Health and Human Services, the estimated per-member claims cost for 2012 is $29,000. That compares to $13,000 per person for those enrolled in existing state-run high risk pools, which federal estimates were based upon.

High-risk insurance plans-whether the existing state-run variety or the new Affordable Care Act plans-charge members premiums that are roughly equivalent to those a healthy person would pay. Since the premiums don't fully cover the high health bills for people with cancer or chronic diseases, the plans are subsidized.

The reason cited for both low enrollment and high costs is that, unlike states, the federal government requires people who have been turned down by an insurance company to wait six months before applying for the new federal health plan. Once they join, they can immediately get coverage for their pre-existing condition. As a result, the report's authors speculate that the program is attracting people who have been uninsured for six months or more, but were recently diagnosed with a severe illness that requires immediate treatment.

When compared people covered by the federal employees health plan, for example, those in the high-risk program are admitted to hospitals eight times as often and visit emergency rooms three times as often, according to the report. 

Even when compared to people of similar health status who are enrolled in existing state-run programs for people turned down by private insurers because of their pre-existing conditions, the costs of claims and the number of hospital admissions are multiples higher. In Colorado's 20-year-old program, for example, average member claims are $1,376 per year. In its new federally-funded plan, average claims are $3,449.

States have been running high-risk insurance pools for people rejected by private insurers since Minnesota launched the first experiment back in the 1970s.

Premium prices for state-run plans vary widely and are generally higher than the new plans funded under the federal health law. In most cases, states supplement revenue from premiums with insurance industry contributions to cover higher than average claims costs. A few states contribute general revenues and require medical providers to chip in.

Nationally, enrollment in the old state high-risk pools totals more than 220,000, with individual state numbers ranging from 27,000 in Minnesota to 238 in Florida . According to the National Conference of State Legislatures, all but 15 states offer state-run high-risk insurance.

Under the federal health law, the new high-risk insurance programs were meant to supplement state plans by insuring more sick people until 2014, when the law requires participating carriers to offer affordable insurance to everyone, regardless of their health status. 

Congress set aside $5 billion to fund the program, and the federal government divvied it among states based on population and poverty levels. The money is intended to make up the difference between the high cost of claims and the relatively low level of premiums paid by members.

Because of low enrollment, only a fraction of the high-risk program money has been spent so far. But in a few states, the allocation is running out. California, which was allotted $761 million, got another $118 million in December. New Hampshire, which received $20 million initially, was given an additional $30 million. In January, nine more states — Alaska, Colorado, Montana, New Mexico, Oregon, South Dakota and Utah — asked for additional funds.

Although enrollment is low, it continues to grow every month, says Amie Goldman, chair of the National Association of State Comprehensive Health Insurance Plans, a support organization for high-risk pools. That, combined with high claims costs, is expected to cause a number of new states to ask Washington for money in the months ahead, she says.

But overall, Goldman says most state officials who run high-risk pools are optimistic that federal money will not run out. It's presumed that some states are under-spending their allocations. Still, she says states are awaiting assurance from the U.S. Department of Health and Human Services that adequate money will be available.

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