Issue Brief

TranslatingResearchtoPolicy

July2008/Issue14

STATEHIGHRISKPOOLSANOVERVIEW

INTRODUCTION
Thirtyfivestateshavedevelopedhighriskpoolsthat
providedhealthinsurancecoverageto190,641
individualsin2006withacombinedfundingof$1.8
billion(NASCHIP2007).Highriskpoolsaredesigned
forthosewithpreexistinghealthconditionswhodonot
haveaccessemployersponsoredinsuranceandhavenot
beenabletosecureaffordablecoverageintheindividual
market.Eligibilityfortheseplanstypicallyrequirethat
individualsdemonstratethattheyhavebeendenied
coverageintheprivatemarketorareofferedaplanwith
anexcessivelyhighpremium.

Highriskpoolsservetheselfemployed,workersof
employerswhodonotprovidehealthinsuranceasan
employeebenefit,individualswhoareinbetweenjobs
andhavelostgroupcoverage,andyoungadults
transitioningoffofaparentshealthinsuranceplan.The
15stateswithoutahighriskpoolincludeNewYork,
Arizona,Delaware,Georgia,Hawaii,Maine,
Massachusetts,Michigan,Nevada,NewJersey,Ohio,
Pennsylvania,RhodeIsland,Vermont,andVirginia
(NASCHIP,2007).

KEYELEMENTSOFHIGHRISKPOOLS
-Statehighriskpoolsofferalastresorttohighrisk
individualswhoarenotabletoobtainaffordable
coverageintheprivatemarket. Akeyfunctionofahigh
riskpoolistoaddressakeyareaofvulnerabilityinthe
privateindividualhealthinsurancemarket:thelackof
statutorilyguaranteedcoverage.Highriskpoolsprovide
healthcoveragetoalleligibleindividualsandeither
limitsordoesnotimposeanypreexistingcondition
exclusions.Largeandsmallemployerhealthinsurance
plansarerequiredbyfederallawtoprovideguaranteed
issuecoveragetoemployees(i.e.,notrestrictaccess
basedonhealthstatus),theindividualmarketisnot
regulatedinthisway,andmoststateshavenot
mandatedguaranteedissueintheirindividualmarket.

Insuranceplansassessorunderwriteindividuals
basedontheirhealthconditionsandmayimposepre
existingconditionlimitations,higherthanaverage
premiumratesorlimitedcoverage(Communicatingfor
AgricultureandtheSelfEmployed2006).
HighriskpoolsmeetfederalHealthInsurance
PortabilityandAffordabilityAct(HIPAA)requirements
forguaranteedavailabilityforpeopleconvertingfrom
grouptoindividualcoverage.HIPAArequiresthatall
statesprovideguaranteedportabilityandrenewability
forpolicyholderstransitioningfromgrouptoindividual
coverage.Stateshaveflexibilityinmeetingthis
requirement,withahighriskpoolbeingonemechanism
approvedbythefederalgovernment.Severalofthe
statesthathavenotestablishedahighriskpooltodate
(e.g.,NewYork,Maine,NewJersey,Vermont)have
mandatedguaranteedissueintheirindividualmarkets
whichisalsoanapprovedmechanismtomeetthis
HIPAArequirement.

-Highriskpoolshelpspreadandstabilizeriskinthe
individualmarket.Statesusemultipleapproachesfor
managingrisk(i.e.,costsofcoverageforpeoplewith
moreexpensivehealthissues)intheindividualhealth
insurancemarket.Highriskpoolsrepresentone
approach.Otherapproachesincludeguaranteedissue
mandates,rateregulationandreinsurance.Through
financingfromindustrymembers(e.g.,viacarrier
assessments),government,andenrollees,highriskpools
provideameansforsharingandspreadingthecosts
associatedwithhighriskindividuals.Bypoolingthese
highriskindividuals,therestoftheindividualmarket
hasalowerandmorepredictableriskonaverage.

Highriskpoolsserveasamechanismforproviding
coverageforindividualseligiblefortheFederalHealth
CoverageTaxCredit(HCTC).UndertheHCTC,early
retireesreceivingpaymentsfromthePensionBenefit
GuarantyCorporationanddisplacedworkersdueto
foreigntradeareeligibleforataxcreditamountingto

State Health Access Data Assistance Center (SHADAC) | University of Minnesota School of Public Health
612-624-4802 | fax: 612-624-1493 | www.shadac.org

65%oftheindividualshealthpremium.Highriskpools
areoneofthemechanismsstatescanuseaspartoftheir
HCTCacceptanceprogram.Twentystatesutilizetheir
highriskpoolforthisreason(NASCHIP,2007).

FINANCINGHIGHRISKPOOLS
Giventhepopulationhighriskpoolsareintendedto
serve,highriskpoolsinherentlylosemoney.(CA
2006)Theaverageclaimcostsperpoolenrolleein2006
was$8,660or$720permonth.Premiumspaidby
enrolleescoveranestimated58%ofprogramcostswhile
mandatedassessmentsonfullyinsuredhealthplans,
stoplossandreinsurancecarrierscovertheremaining
losses.

Alesscommonforoffinancingisastateassessmenton
providers,asisthecaseinMarylandandWestVirginia
(NASCHIP,2007).Statesalsousegeneralfunds,tobacco
taxrevenuesandtobaccosettlementfundsto
supplementbaserevenueforhighriskpools.

Finally,elevenstatesprovidefullorpartialtaxcreditsto
insurerstooffsetassessmentswhichcouldalsobe
consideredageneralfundsubsidytosupporthighrisk
pools.Eachstateusesdifferentcombinationsofthese
financingschemeswithsustainablefundinganongoing
concernforstatehighriskpools(NASCHIP,2007).

PremiumsforHighRiskPoolsareCapped.Tooffer
affordablecoverage,statessetandthencaptheirrisk
poolpremiumsbasedonthestandardriskratethatis
theaveragerateintheindividualmarketwithinthe
state.Highriskpoolpremiumsrangefrom125to200%
oftheaverageindividualprivatemarketpremiumwith
Floridalawallowingratesupto250%(NASCHIP,2007).

Severalstatesofferpremiumsubsidiesordiscount
programs.Toimproveaffordabilityforindividuals,
somestateshaveadoptedpremiumdiscountprograms
toassistlowincomeparticipants.Federalgrants(under
theTradeAdjustmentAssistanceReformActof2002
andStateHighRiskPoolFundingExtensionActof
2006)havebeenavailabletostatestoassistwiththese
efforts.

SelfinsuredERISAplansdonothelpfinancehighrisk
pools.Highriskpoolsareavailabletoallindividuals
whodonothaveaccesstoemployersponsored
insurance.Yet,assessmentstocoverlossesinthehigh
riskpoolareonlyassessedonfullyinsuredplansthat
areregulatedbystateinsurancestatutes.Selfinsured

plansgovernedbyERISAarenotregulatedbythestate
anddonotparticipateinfinancing.Somelegislators
andpolicyanalystshaveconsideredalternative
financingmechanismsincludingassessmentonthird
partyadministratorassessmentssimilartothose
implementedinMaine,aswellasbroadbasedprovider
assessments.

FEDERALROLEINFINANCINGSTATERISKPOOLS
The2006StateHighRiskPoolFundingExtensionAct
waspassedandextendedinitialgrantfundingforstate
riskpoolsinitiallyincludedintheTradeAdjustment
andAssistanceActof2002.Thesegrantsareintended
toincreasecoverageofthosewithnohealthinsurance
whoareconsidereduninsurableduetotheirhealth
status.Thesegrantsincludefundingforexistingpools,
fundsforlowincomesubsidiesandstartupfundsfor
statesthatcurrentlydonothaveriskpools.Atotalof
$75millionperyearforeachfiscalyear2006through
2010isadministeredbytheCenterforMedicaidand
MedicareServices(CMS)toeligiblestateriskpools
basedonaformulathatincludes,inpart,acomponent
thatincludesthenumberofuninsuredinthestate.

ADVANTAGESOFHIGHRISKPOOLS
Increasesstabilityoftheindividualhealthinsurance
market.Bydirectingindividualswithserious(and
costly)healthproblemsastateshighriskpool,thoseleft
intheindividualmarkethavelessriskonaverage
helpingtokeeppremiumcostsdown.Dependingon
thepoolseligibilityrules,stateunderwritingpractices,
andallowingdependentsandspousesmayallowlower
riskindividualsintothepoolhelpingtostabilizethe
averagecost.

Highriskpoolsprovidehealthinsurancecoveragetoa
populationthattypicallycouldnotfindorafford
coverageintheprivatemarket.Withconcernsabout
erosionofemployersponsoredhealthinsuranceandthe
highcostofcoverageintheindividualmarket,highrisk
poolsprovideanopportunityfortheuninsuredwith
healthconditionstoobtainhealthinsurancecoverageat
significantlyreducedpremiumcosts.

Highriskpoolsprovideuniquepatientpopulationwho
couldbenefitfromcarecoordinationanddisease
management.Manyhighriskpoolsaredevelopingand
implementingdiseasefocusedcaremanagementwhich
hasthepotentialtoimprovethehealthstatusof
individualsandreducehealthcarecosts.

State Health Access Data Assistance Center (SHADAC) | University of Minnesota School of Public Health
Sponsored by a grant from The Robert Wood Johnson Foundation

Thenewfederalfundingforhighriskpoolsmayhelp
stabilizefinancingandkeeppremiumsaffordable.The
StateHighRiskPoolFundingExtensionActof2006
solidifiedfederalfinancingsupportoveraperiodoffive
years.The$75millionoffundsperyearfor2006
through2010providesbaseoperationalfundingin
additiontoincentivestodeveloppremiumsubsidy
options,toreducetrendsinpremiumincreases,to
loosenuppreexistingconditionlimitationsandprovide
increasedbenefitsincludingdiseasemanagement
(NASCHIP2007).

Providinghealthinsurancecoverageforthosewith
significanthealthcareneedsmayreducehospitaland
providerlevelsofuncompensatedcare.Highriskpools
provideonecomponentofthehealthcaresafetynetby
providingreducedcosthealthinsurancecoveragefor
thosewithsignificanthealthcareneeds.These
individualswouldotherwisebeconsidered
uninsurableandwouldbelefttofacethedirectcosts
ofcareinthemarketmanyofthesecostswouldgo
uncompensatedleavingproviderswithanincreasein
eithercharitycareorbaddebt.

ONGOINGISSUESWITHHIGHRISKPOOLS
Thereislimitedevidencethathighriskpoolshavehad
asignificantimpactontheuninsured(NASHIP2007).
Thenumberofparticipantsinstatehighriskpoolsrange
from236participantsinWestVirginiato30,000in
Minnesotain2006(NASHIP2007).Moststateshavea
participationratefrom.05to.33%ofthepopulation.
Participationinthelargestpool,Minnesota,still
representslessthan1%ofthepopulation.

Premiumsforhighriskpoolsmaystillbeunaffordable
formanyindividuals.Evenwiththemandatedcapson
premiumlevels,theaveragepremiumintheindividual
marketmaystillbehighandthecapsmaybeashighas
250%oftheaveragerate.Withoutadditionalsubsidy,
lowincomeindividualswithhealthconditionsmaynot
beableaffordtoenrollinahighriskpool.

Increasinghealthcarecostscreatepressuresonhigh
riskpoolfinancingandenrollment.Costpressures
haveledsomestatestolimitenrollmentofnonfederally
eligibleindividuals,limitthetimeanindividualcanbe
inthepool,limittheannualclaimpayment,and/or
increasingenrolleecostsharing.Thelongtermstability
ofthesepoolsisaconcerngiventhehighlevelandcost
ofhealthcareservicesthatarerequiredforthosewith
significanthealthcareneeds.

Concernaboutthestabilityoffundbaserequiredto
supportriskpooloperationsovertime.Thereissome
concernthatthefundingbaseforhighriskpoolsistoo
narrowandcannotsustainoverallgrowthinthepools.
Sinceassessmentstocoverlossesaredirectedonlyto
fullyinsuredplansthereisinterestinbroadeningthis
fundingbasethroughassessmentsonthirdparty
payers,broadbaseproviderassessmentsandgeneral
fundrevenuesupport.Aconcernrelatedtostate
funding,however,isitsconsistencyandstability.Some
believethatrelyingonannualstatebudgetsmaymake
poolfundingmoreuncertain.Inthiscontext,insurer
assessmentshavebeenviewedbysomeasmore
predictable.

SUMMARY
Statehighriskpoolscontinuetobeanimportant
componentofthecomplexUShealthcaresystem.They
provideguaranteedaccesstohealthinsurancecoverage
forindividualswithsignificanthealthcareneeds
removingsignificantriskfromtheindividualhealth
insurancemarket.Whilethesizeofthesepoolsis
relativelysmallcomparedtoastatespopulations(less
than1%),theyplayanimportantroleforthese
individualsandforthehealthcaresystemoverall.
Continuedexpansion,however,isunlikelywithout
additionalfinancingtosupportthecostsofthecoverage
andsubsidiestoprovideaffordablepremiumstothose
withlowerthanaverageincomes.

AUTHORS:LynnA.Blewett,PHDandDonnaSpencer,
UniversityofMinnesota,StateHealthAccessData
AssistanceCenter(SHADAC)www.shadac.org.Fora
copyoftheircasestudyofMinnesotashighriskpool,
theMinnesotaComprehensiveHealthAssociation
(MCHA)see:

Notes:
CommunicatingforAgricultureandtheSelfEmployed(CA),Inc.
(2005/06).ComprehensiveHealthInsuranceforHighRiskIndividuals:A
StatebyStateAnalysis.19thEdition.FergusFalls,MN.

NationalAssociationofStateComprehensiveHealthInsurancePlans
(NASCHIP).(2007/08).ComprehensiveHealthInsuranceforHighRisk
Individuals:AStatebyStateAnalysis.21stEdition,2007/2008.St.Louis
Park,MN.

State Health Access Data Assistance Center (SHADAC) | University of Minnesota School of Public Health
612-624-4802 | fax: 612-624-1493 | www.shadac.org