HHS Begins Forming High-Risk Pools

The secretary of the U.S. Department of Health and Human Services, Kathleen Sebelius, has taken a first step toward establishing risk pools for the uninsured, sending letters to state officials asking which states might be interested in forming temporary, high-risk pools, or expanding on what they already have.

The program -- to be established with $5 billion provided by the newly passed health reforms -- is voluntary for states and is designed to provide coverage to uninsured people with pre-existing conditions.

"The establishment of a temporary new high-risk pool program is one of our first tasks in implementing the new health reform law and will help provide affordable insurance for Americans who have been locked out of the insurance market for too long," Sebelius said in a statement. The secretary said she'll await the responses from governors or independent state insurance commissioners. But she pointed out in the letter that "the law directs HHS to carry out the program directly or through contracts with states or private, nonprofit entities." So, even if states decline, the agency will push forward with the program. The agency is asking states for letters of intent by the end of April that indicate whether they'll be applying for inclusion in the program.

"In reviewing the existing state high-risk pools, there is much common ground in the benefits currently provided," the letter said. "Since HHS is considering establishing a floor set of benefits that all the new high-risk pool programs must cover, we anticipate that these benefit requirements would take into account benefit lists currently used by existing state high risk pools."

The program money is scheduled for availability beginning on July 1, and the program will shut down in 2014, when pre-existing condition restrictions are banned in all health insurance.

The letter from Sebelius laid out some of the requirements for benefits and premiums:

--Benefits must have an actuarial value of at least equal 65% of total allowed costs;

--An out-of-pocket limit no greater than the applicable amount for high-deductible health plans linked to health savings accounts;

--Premiums must be established at a standard rate for a standard population (that is, not exceed 100% of the standard non-group rate); and

--Not have age rating greater than 4 to 1.

According to a report from the U.S. Government Accountability Office, 35 states were already running high-risk pools of their own in June of 2009. In 2008, almost 200,000 people were enrolled, and about 4 million more were considered eligible. That year, the plans paid out about $1.9 billion in claims -- averaging $9,437 for each enrolled person. Premium revenue paid for 54%, and another 23% was paid for by assessments on insurers. Minnesota and Texas had the highest numbers enrolled.

(Jesse A. Hamilton, Washington bureau manager: [email protected])