This week, we got new stories about private insurers planning to kick childrento the curb because of a loopholethat allows insurers to write new plans that can deny coverage to a child with a pre-existing condition.
Even though HHS Secretary Kathleen Sebelius will be issuing regulations to fix this problem next month, there are indications that private insurers will be challenging this regulation. If their challenge fails, and the HHS regulation stands that they have to cover children with pre-existing conditions, there is an additional problem:
The law does nothing to stop insurers from charging higher rates for children with pre-existing illnesses until 2014 when insurers can no longer use health status in setting premiums.
What happens if families can't afford premiums that are raised higher because their child has a pre-existing condition? There is one solution that families can turn to---the national high risk pool.
The national high risk pool program will be run through state high-risk pools with funding allocated to these pools by the Secretary of Health and Human Services. The funding allocated for this high-risk pool is set at $5 billion, and the HHS Secretary is required to accept all applications until the $5 billion in funding is exhausted.
Most of these state high-risk pools don't have an annual limit on covered benefits, but almost all of them do have lifetime limits. As stated in the January 2010 issue paper by the Kaiser Commission On Medicaid and the Uninsured:
Five states—California, Louisiana, Tennessee, Utah, and West Virginia-- have annual medical maximums that range from $75,000/year in California to $300,000/year in Utah. The lifetime benefit maximum ranges from $625,000 in Louisiana to $5 million in Minnesota and in some plans in Florida. In twelve states the lifetime maximum benefit is $1 million. For people with high health care needs, the benefits they receive could easily exceed the maximum benefit level in some states.
It's not clear yet whether the HHS Secretary has the regulatory authority to set annual and lifetime limits for states to follow as stated in the Senate bill, but the House bill did ban annual and lifetime limits on insurance coverage in the high-risk pool. I'll be looking more into that issue.
And what about the premium costs in these state high-risk pools? They're usually set at the standard cost for underwritten individual health insurance plans (which is known as the standard market rate). States also have their premium coverage capped between 125% and 200% of the standard market rate. These premiums usually range from $550 a month to over $1,200 a month. The average deductible for the most popular insurance plan in each state is about $1,593. Kaiser also reports that over two-thirds of enrollees in the most popular plan in each state had annual out-of-pocket spending that ranged from $2,000 to $7,000 in 2008. In some cases, the out-of-pocket limits were as high as $10,000.
Here's how the national high-risk pool in the Senate bill affects premiums, deductibles, and out-of-pocket costs for Americans in state high-risk pools:
1. Eligibility: U.S. citizens and legal immigrations who have not had creditable coverage for the previous six months and who have a pre-existing medical condition.
2. Benefits: The HHS Secretary determines the benefits that must be included, and requires health plans to have an actuarial value of at least 65%.
3. Premiums & Cost-sharing: Set premiums at the prevailing rate for comparable coverage. Allow premiums to vary by age (4:1), geographic area, family composition, and tobacco use. Limits out-of-pocket spending to $5,950 for individuals and $11,900 for families.
4. Funding: $5 billion.
5. Timeline: Effective 90 days after bill is enacted, likely on June 21, 2010, and ends on January 1, 2014.
The national high-risk pool was written differently in the House bill, as you can see below:
To make coverage for this population more affordable, the bill sets premiums at no higher than 125% of the prevailing rate for comparable coverage in the state, premiums can vary by no more than 2 to 1 due to age, and are adjusted for geographic variation in costs.
Annual deductibles would be limited to $1,500 for an individual, cost-sharing would be limited to $5,000 for individuals and $10,000 for families, and there would be no annual or lifetime limits on benefits. The plan would prohibit the exclusion of pre-existing conditions and the benefits provided in the high-risk pool would be consistent with the basic categories in the essential benefits package that would be required in all health plans.
What about subsidies to make health insurance in the high-risk pool affordable for families and individuals with pre-existing conditions? There's nothing in the legislation about subsidies to help families and individuals get affordable insurance coverage if private insurers continue to deny them coverage before 2014 based on pre-existing conditions. However, about 15 states do have subsidies for low-income, and it varies by eligibility, as you can see here in the issue paper. We don't know yet if the funding will also go to to these subsidy programs, but it's a question that likely will be resolved once the high-risk pool gets started this summer.
However, the $5 billion in funding for the national high-risk pool is slated to run out by 2011 or 2012 according to the Congressional Budget Office. In this additional paper by the Kaiser Family Foundation, the HHS Secretary has the powers given to her in the Senate bill to make:
suspension of new enrollment, premium increases, or reductions in covered benefits.
That is what the Secretary of HHS is empowered to do if the $5 billion in funding runs out. If that is the case, then families and individuals still would be excluded from insurance coverage until 2014 when the exchanges open. We have the problem of funding which we will have to face soon, over-enrollment in the program, and further obstruction from Republicans and insurers at the state level for each state high-risk pool.
Also, in anticipating a large infusion of federal funding, some states are already taking action on this issue by passing new lawsregarding their state-run high-risk pools:
Maryland introduced emergency legislation: (HB 1564, March 22, 2010)
"Authorizing the Board of Directors for the Maryland Health Insurance Plan to elect for the Plan to administer a specified national high risk pool program for the State; authorizing the Board to enter into any agreements necessary for the Board to administer the program"
Louisiana S 153 (Filed 3/16/10)
Would amend the structure for the High Risk Pool,providing that it " may establish, provide for, administer, and contract to provide coverage for a health plan to offer eligible individuals and families the ability to purchase or enroll in a program established under federal law that provides expanded coverage for state high risk pools. Initial rates for plan coverage provided to non federally for federally defined eligible individuals shall not be less than one hundred fifty twenty-five percent of rates established as applicable for individual standard risks.
Missouri H 1964 of 2010 (Filed 2/3/10)
Amends the high risk pool by lowering the maximum premium rate from 150 percent to "not exceed 125 percent of rates applicable to individual standard risks."
It's good that Louisiana and Missouri are moving to lower the maximum premium rate to 125% of the rates applicable to the standard rate.
However, it's not clear to me if "prevailing rate" as stated in the Senate bill refers to the current rates that states use. If that is the case, then premiums could still range from 125% to 200% of the standard market rate. It seems that states aren't expressly barred from setting caps or changing them on current standard premium rates. Any further clarification on this point would be helpful.
Also, I want to point out that we need to be on alert for the regulations issued by HHS Secretary Sebelius regarding the loophole on the pre-existing conditions ban for children. There might be an open comment period, so it'd be great if we could help out the White House administration by posting in favor of the regulation. If there is a court challenge, we'd need to confront private insurers if they win that court challenge, and push for another bill to address this issue of the ban on pre-existing conditions for children.
Our work won't stop on getting real health care reform, and neither will yours.
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