High-Risk Health Care Plans Fail to Draw Crowd

Throughout the rancorous public debate over the national health law, two provisions have maintained broad public support. One is the requirement that insurance companies let young adults up to age 26 remain on their parents’ policies. The other is a federally subsidized insurance plan for people whose medical conditions make them uninsurable in the private market.

Covering young adults has been a resounding success. As of April 2011, more than 600,000 were included in their parents’ health plans. The Obama administration predicts 1.2 million will be covered by year’s end.

But the health law’s lifeline for sick people who can’t get insurance anywhere else has been a virtual nonstarter. A year into the program, only 21,000 out of an estimated 25 million uninsured people with “high-risk” conditions such as cancer, heart disease and diabetes have signed up. When the law was enacted last year, administration officials projected enrollment would reach 375,000 and many worried that funding would run out. So far, only 2 percent of the billion subsidy has been spent.

The high-risk program was intended to be a bridge to 2014, when state-run health insurance exchanges will offer affordable coverage for everyone, regardless of health status. Speculation varies as to why it has been slow to take off.

The biggest sticking point, according to a new report from the U.S. Government Accountability Office, is that only people who have been uninsured for at least six months are eligible. Congress added that provision to limit the number who would qualify. Others say the cost of premiums in the high-risk pool-though generally lower than for other available policies-is still too high for most patients to afford.

Cost is clearly the biggest deterrent, says Amie Goldman, chair of the National Association of State Comprehensive Health Insurance Plans . State officials who have run their own high risk insurance programs for decades continually struggle with the problem. Sick people cost more to cover, but you still have to offer benefits that they can afford, Goldman says.

Even in Pennsylvania’s high-risk program, where monthly premiums of are among the lowest in the country, spokeswoman Rosanne Placey says nearly 10 percent of subscribers drop out of the state plan every month. “They call us and say they can’t afford to keep making the payments.” State officials who have had this experience are not at all surprised that the Obama administration’s effort has attracted little interest.

State vs. federal

When the federal government announced its high-risk insurance program in April 2010, states were asked to choose whether they wanted to run their own plans or let the federal government do it. Pennsylvania and 26 other states elected to run their own programs and set their own rates; 23 states and the District of Columbia opted for the federal plan, in which rates are equal to the market price for healthy people. More than a year later, one thing is clear. The state-run plans have been more successful than the federal program, at least relatively speaking. States have garnered more than 15,000 subscribers; the feds have signed up just 6,000.

Pennsylvania-which has 3,700 subscribers, the biggest enrollment in any state high-risk program-offers a good example of why state-run operations have worked better than the federal effort.

New high-risk insurance plans: not many takersTop states in enrollees:

1. Pennsylvania, 3,191
2. California, 1,858
3. Texas, 1,528
4. North Carolina, 1,302
5. Illinois, 1,261

Bottom states in enrollees:

1. Vermont, 0
2. Massachusetts, 1
3. North Dakota, 9
4. Maine, 14
5. District of Columbia, 21

Enrollment numbers as of April 30, 2011.
Source: U.S. Government Accounting Office

The first thing Pennsylvania officials did was email some 20,000 individuals and groups who had previously participated in a state health insurance plan that had lost its funding. Next they produced low-cost radio and Internet advertisements and created print brochures that lawmakers and agency staff handed out when they appeared before audiences. They also worked with hospitals and other health care providers to spread the word. If someone showed up in an emergency room with a qualifying condition and no insurance, they were signed up.

Pennsylvania’s plan is also one of the simplest. The premium is the same regardless of a person’s age.  New York is the only other state with just one price. Most state-run programs have more than 20 different prices; North Carolina and Ohio have more than 50. Pennsylvania makes signing up easy. The application is online and it takes no more than 10 minutes to fill out.

“People thought we were some kind of marketing geniuses,” says Placey, of Pennsylvania’s high-risk insurance program, PA Fair Care . “HHS (the U.S. Department of Health and Human Services) told states to call us for advice.”

But Pennsylvania had another advantage over other states. It was offering something new. Unlike 35 other states, Pennsylvania had never created a program for people whose medical conditions made them uninsurable.

Legacy plans

Wisconsin, for example, has run a high-risk insurance pool for nearly 35 years. With only slightly higher priced premiums, the state’s old pool has 21,000 members and grew by 18 percent last year. The new pool-which Wisconsin runs out of the same office-has only 547 clients.  Maryland also had a pre-existing pool with more than 20,000 subscribers. Even after hiring a marketing firm to help boost enrollment for the federally subsidized program this year, Maryland’s new plan has only 348 subscribers.

States have been developing high-risk insurance programs for people rejected by private insurers since Minnesota launched the first experiment back in the 1970s. Premium costs for these plans vary widely from state to state and are higher than under the new plans funded by the Affordable Care Act. In most cases, states supplement revenue from premiums with insurance industry contributions to cover higher than average claims costs. A few states contribute general revenues and require medical providers to chip in.

Nationally, enrollment in the old state high-risk pools totals 223,000, with individual numbers ranging from 27,000 in Minnesota to 238 in Florida.

According to Goldman, the biggest reason the older state pools continue to grow is that they don’t require people to have been uninsured for six months. Instead, people can sign up as soon as they lose coverage, but have to wait a number of months to get coverage for their high-risk conditions. Few people who are in an older state plan want to take the risk of leaving it, because they’re afraid to wait six months to get federally subsidized insurance.

Another likely reason people are slow to join the new plans is that once they’ve waited for six months without insurance, they know they can get coverage as soon as they sign up. There’s little reason to pay the premiums in advance of getting sick. That’s why claims costs for the new plans have exceeded actuarial predictions in some states. Colorado, New Hampshire, Oregon and Washington, for example, have had low enrollment but excessive costs, because new enrollees have tended to need hospital stays right away and haven’t put any money into the programs.

In May of 2011, HHS tried to fix some of the start-up problems. It dropped a requirement that applicants produce a rejection letter from an insurance company and opted for a simple doctor’s note. HHS also reduced premiums by an average of 20 percent, with reductions as high as 40 percent in some states. Earlier in the year, grants were awarded to states, media outlets, consumer groups, health care providers, and others to increase awareness of the program.

HHS officials point out that other federally subsidized health plans-even free ones such as Medicaid and the 1997 Children’s Health Insurance Program-took years to build enrollment. 

But the difficulty in reaching people with serious medical conditions may signal a bigger problem. If sick people without insurance are slow to sign up for a subsidized health plan, how will states fare in 2014 when they try to entice 46 million healthy people to plunk down a portion of their paychecks for health insurance? The controversial “individual mandate” will require people to have a policy or pay a fine. But the cost of the fine will still be far cheaper than the premiums.