The high cost of high-risk health insurance pools

2010-09-14T21:00:00Z The high cost of high-risk health insurance poolsBy The Editorial Board stltoday.com
September 14, 2010 9:00 pm  • 

Judging strictly by numbers, as many as 170,000 Missourians could be eligible for a new high-risk health insurance pool.

That’s the estimate of how many have been uninsured for at least six months, aren’t offered health benefits at work and have a chronic illness or a pre-existing condition that makes it impossible to buy health insurance on their own.

Once health care reform is fully implemented in 2014, these people can buy health insurance through one of the new state insurance exchanges. Until then, Missouri and most other states have established high-risk pools to cover them, backed by $5 billion in federal funding.

How many of the 170,000 people in Missouri who are potentially eligible have enrolled in the new plan? About 100.

All across the country, state high-risk pools are attracting little attention, even as the number of uninsured and underinsured Americans continues to grow. What gives?

It could be that many eligible people don’t yet know about the pool, which only began accepting applications in July. Or that many still are gathering their paperwork preparing to apply.

That could be true, but it probably is not.

It is more likely that few people have signed up because Missouri’s high-risk pool is expensive. It costs more than similar programs in Kansas and Illinois. And like similar programs across the country, it costs substantially more than employer-provided group health coverage.

On average, employer-provided coverage for a single worker costs $421 a month, or $5,049 a year. Employer-provided family coverage costs about $1,148 a month, or $13,770 a year.

A 50-year-old man buying coverage through the high-risk pool would pay $680 a month, or $8,160 a year. The cost rises with age, so a 64-year-old would pay about $972 a month to participate in Missouri’s high-risk pool. That works out to a staggering $11,664 a year to cover one person.

The cost of coverage is high because rates in Missouri’s high-risk pool are based on average prices charged by the five largest insurance companies operating in the state. Insurance rates in Missouri are higher than in either Kansas or Illinois.

In other words, it isn’t just Missourians in the high-risk pool being overcharged for health insurance. It’s everyone who buys his own health insurance.

That comes as no surprise to health analysts, many of whom have been saying that the so-called non-group health insurance market has been broken for years.

According to some studies, as many as 75 percent of the people who start out trying to buy health insurance on their own never consummate the deal, either because they cannot afford it or because pre-existing conditions make it impossible to get coverage at any price.

This failure of the individual insurance market is no small point. A major premise behind health care reform is that market-based systems can help hold down costs. But unlike traditional insurance pools, which spread risk broadly, high-risk pools concentrate it. No wonder they must charge higher premiums.

A better approach is to absorb high-risk patients into existing coverage pools, like the pool of Medicaid patients or the pool of state workers. Congress should consider revising the temporary high-risk pools to give states the option of establishing broader risk pools.

Health care reform ultimately will make life easier for high-risk patients. The question — for the uninsured as well as state governments — is how to walk the tightrope until 2014.

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