$5 billion interim Patient Protection and Affordable Care Act funding not enough to cover uninsured with pre-existing conditions

While 5.6 million to 7 million Americans may qualify for health coverage through a new temporary national high-risk pool program, the $5 billion allocated until 2014 will cover only a fraction of those in need, potentially as few as 200,000 people a year, according to a new policy analysis from the National Institute for Health Care Reform (NIHCR).

The analysis identifies policy considerations in designing the temporary high-risk pool program created by the 2010 Patient Protection and Affordable Care Act (PPACA) to provide subsidized health coverage to people who are uninsured because of pre-existing medical conditions. The law includes insurance market reforms and income-based subsidies, but most of these measures do not take effect until January 2014. To bridge the gap, the law provides for an interim national high-risk pool, modeled on those already operating in 35 states, scheduled to start July 1.

Estimates from the 2007 Medical Expenditure Panel Survey (MEPS) show about 51.6 million nonelderly people were uninsured in December 2007, the most recent available full year of data, according to the analysis. Of these, 43.7 million - 85% of the total - had been without insurance for six months or more, as required by PPACA. Of that group, nearly 7 million had potentially high-cost medical conditions.

Of the nearly 7 million uninsured with high-cost conditions, 14% were offered coverage through their current employment. If those with access to other coverage were excluded, they likely would find subsidized employer coverage more affordable than premiums in the high-risk pool program. Approximately 5.6 million people might be eligible for the new high-risk pool program, according to the analysis.

In 2008, existing state high-risk pools' costs per participant exceeded premiums by $4,200, according to a 2009 U.S. Government Accountability Office report. The subsidy needed to bring premiums to 100% of standard rates would have been in the range of $6,000 to $7,000, according to the NIHCR analysis. If federal subsidies of this size were provided for the full life of the national program, the annual number of people who could be covered would be around 200,000.

Generally, the temporary program is open to citizens and legal residents who have a pre-existing condition and who have been uninsured for at least six months.

“Our analysis looked at high-cost chronic conditions using the classification AHRQ (Agency for Healthcare Research and Quality) uses to identify people who had conditions that cost about 1.5 times what normal expenses would be,” says Alwyn Cassil, director of Public Affairs for the Center for Studying Health System Change. “So there’s a range of chronic conditions, which is not to say that someone with an acute problem who can’t get insurance elsewhere might not be eligible for the pool as well.”

Written by Mark Merlis, a health policy consultant, the NIHCR analysis examines how policy makers might tailor eligibility rules, benefits and premiums to stretch the $5 billion. The new policy analysis, “Health Coverage for the High-Risk Uninsured: Policy Options for Design of the Temporary High-Risk Pool” is available online at www.nihcr.org.

"It is likely that policy makers at both the federal and state level will have to choose between two basic courses,” according to the analysis. “They can simply open the doors to programs that are more generous than most current state pools and allow the programs to reach capacity... Or they can look for ways to limit entry to the program to those most in need and/or to stretch the dollars to serve more people. How much leeway they have to modify the outlines of the program is uncertain."

The law does not specify what benefits must be provided, but the pools must cover at least 65% of the cost of whatever services are covered. The coverage also must have an out-of-pocket limit - the sum of deductibles, coinsurance or copayments - no greater than the limits established for high-deductible health plans linked to health savings accounts: $5,950 for an individual and $11,900 for a family in 2010.

It’s not yet known what the individual pools will cover, such as drug benefits.

“I don’t think anyone knows what the drug benefit will look like in the individual pools, but there will probably be some form of drug coverage,” says Cassil.

The U.S. Department of Health and Human Services (HHS) will oversee the temporary high-risk pool program and has asked states to indicate whether they want to administer the program in their own state. If a state does nothing, HHS will administer the program. As of May 21, 29 states and the District of Columbia had signaled an interest in operating their own programs, 19 states had declined and two states were undecided.