Expanding Individual Health Insurance Coverage: Are High-Risk Pools The Answer?

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Abstract:

Thirty states operate high-risk pools intended to offer coverage to persons denied coverage in the individual health insurance market. But in most states the high-risk pool mirrors the individual market’s problems: Coverage is expensive, the waiting period for coverage of preexisting conditions is long, and benefits may be limited. A few states with high-risk pools have addressed these problems by adequately funding high enrollment and comprehensive benefits; some also require the market to accept more risk. But most discourage enrollment in the high-risk pool in myriad ways and fail to ensure access to the individual market for persons with health problems.

Thirty states operate high-risk pools intended to offer coverage to persons who are denied coverage in the individual health insurance market. Nearly all states fund these pools by assessing both group and individual health insurance premiums; some fund them from general revenues or other special assessments. All spread the cost of high-risk enrollees widely.

In principle, high-risk pools are a brilliant solution to a serious dilemma: They would solve a pressing social problem, guaranteeing access to adequate coverage while allowing the private health insurance market to operate relatively unencumbered by “social” regulation. Subsidies would ensure that they are affordable to individuals not eligible for public coverage, and their cost would be distributed broadly to minimize burden.

In practice, however, high-risk pools often fall well short of this mark. They typically mirror the individual health insurance market’s problems of access, affordability, and benefit adequacy, and they offer more costly and less complete coverage than many policymakers might imagine.

A recent study of high-risk pools released by the Commonwealth Fund examined high-risk pools’ benefit designs and premiums.1 This paper summarizes some of the findings of that report and addresses some concerns about its intent and conclusions.