Health Care Reform Update: High-Risk Pools

By Julia Day, MSW
Contributions from Bryon MacDonald
Disability Benefits 101 Information Services
California Work Incentives Initiative, World Institute on Disability

May 12, 2010

This is an update on high-risk pools, a component of national health care reform that will be going into effect soon.

Starting on July 1, 2010, people who can’t get insurance because of pre-existing conditions will have immediate access to high-risk pools that don’t exclude people with pre-existing medical conditions.

• To apply to a high-risk pool, you must be a U.S. citizen or lawfully present in the United States; have had no health coverage for the last 6 months; and have a pre-existing condition, which will be defined by the U.S. Department of Health and Human Services.

• People will have to pay a premium to participate in the pools. However, the law limits premiums to “standard rates”, defined as the average amount private insurers in the state charge for premiums for similar coverage.

• The law says that older people can’t be charged more than four times what younger people are charged to participate in the plan.

• There are limits on annual out-of-pocket expenses for participants in the pools ($5,950 for an individual) and plans have to cover at least 65% of the costs allowed by the plan.

The creation of high-risk pools is a temporary measure; the pools will end on January 1, 2014, when government-regulated insurance exchanges start operating. By this date, the law also mandates that insurance companies will no longer be able to deny people coverage because of pre-existing conditions.

Update:

• The federal government gave each state the option to run the high-risk pools on their own, with federal funding, or else to have the eligible people living in their state use a federal fallback high-risk pool that the federal government will run. 30 states chose to run the pools themselves, 18 states chose to let the federal government run them, and two have not responded. A list of these states can be found at HealthCare.gov.

• 34 states already currently run high-risk pools. They may continue to run these pools if they meet the standards in the law, or they may change them or set up new pools. Regardless of which option a state chooses, the pools will be 100% federally funded. The law sets aside $5 billion in federal funding to help pay for these pools. This funding becomes available on July 1, 2010.

• High-risk pools in each state will operate under the same standards described in the law. However, the pools may be different in each state. On May 10, 2010 states received applications for state-run pools, so the process of designing these pools and deciding on the details is happening now.

Background on Health Care Reform:

In late March of 2010, the U.S. Congress finished passing the Patient Protection and Affordable Care Act (H.R. 3590) and the Health Care and Education Reconciliation Act of 2010 (H.R. 4872). Soon after, President Obama signed these pieces of legislation into law, creating Public Law 111-148 (the Patient Protection and Affordable Care Act) and Public Law 111-152 (the Health Care and Education Reconciliation Act of 2010).

These laws will result in significant reform of our nation’s health care system, including extending health care coverage to many more millions of Americans.