KHI News Service

States begin considering high-risk pool provisions of health reform

Kansas likely to end up with two pools

By Mike Shields | April 02, 2010

Some of the most discussed features of the new, national health reform law won't kick in until 2014 but there are others that have state and federal officials scrambling to meet implementation deadlines that come within the next several weeks.

For example, a letter went out today from U.S. Health and Human Services Secretary Kathleen Sebelius to the nation's governors and insurance commissioners asking how their states want to be involved with the new, federal, high-risk health insurance pool.


High-risk pool letter

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The new health reform law will turn loose $5 billion in federal grants to help fund high-risk coverage beginning July 1 and continuing through Jan. 1, 2014, when other provisions of the law are expected to make high-risk pools essentially unnecessary.

Work with the states

State officials were told in today's letter from Sebelius that they have until next Friday to let HHS know who they have designated as their lead contact for moving forward with the high-risk program. They are to inform HHS by April 30 whether they intend to apply for a contract to operate a program under the new law or leave implementation in their states entirely to the federal government.

Kansas is among about 35 states that already have a high-risk pool and Sebelius signaled that her agency would work with existing programs rather than force upon them a new federal plan, though the law allows or requires the national government to create high-risk pools in states that don't have or develop them in accordance with the new law's provisions.

High-risk pools provide health insurance for people whose medical history makes it difficult or impossible for them to otherwise find affordable coverage.

In Kansas, about 1,800 people are enrolled in the state's existing plan, which is managed by the Kansas Health Insurance Association.

Nationally, existing state high-risk pools cover about 200,000 people.

Linda Sheppard, director of the accident and health division at the Kansas Insurance Department said she and Commissioner Sandy Praeger just returned from the spring meeting of the National Association of Insurance Commissioners in Denver where an HHS official described the agency's intentions with respect to high-risk pools.

Linda Sheppard

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“The secretary's intent is to work with existing high risk pools in state's that have them,” Sheppard said. “Up until this week, there were a lot of questions about how this was going to be done and whether there would be a whole separate, new pool run from the secretary's office and we have some clarification on this now.”

Cheaper premiums

Sheppard said much remains undecided but that Kansas is likely to end up with two high-risk pools – the current state pool and a second that embraces the federal requirements, which call for cheaper premiums.

Kansas law governing the existing high-risk pool here allows for premiums up 150 percent the cost of a standard, non-group policy, though that has been held to 128 percent by decision of the risk-pool's governing board.

The new federally subsidized high-risk pool won't allow insurers to collect more than 100 percent and it must have “an actuarial value of at least 65 percent of allowed costs,” according to the Sebelius letter.

Another way to say it is that co-pays, deductibles and other so-called "out-of-pocket" expenses for those enrolled couldn't exceed 35 percent of the cost of the premium.

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Also, premiums wouldn't be allowed to vary more than four to one due to the participant's age.

People already enrolled in the state's existing high-risk pool couldn't switch to the new, cheaper pool because the health reform law restricts enrollment to people who have gone without health insurance for at least six months.

Sheppard said the insurance department likely would work with the Kansas Health Insurance Association to also manage the new, second risk-pool that meets federal standards.

She said the association's annual meeting is Thursday in Topeka and that insurance department officials would meet then with the group's board to go over the new health reform provisions and the ways the state could meet them.

There already have been some discussions, she said, about the association's “resources” and ability to take on the responsibilities of a new and separate pool.

Whatever arrangement is settled upon, it needs to happen fast.

According to the new law, “establishment of a new pool is supposed to happen in 90 days,” Sheppard said. “That's a very short time frame. That's why I was very happy to get this letter (from Sebelius) today,” describing the federal government's intentions and preliminary expectations.

Sheppard said the insurance department also is gearing up to review policy forms from health insurance companies to assure they meet some of the reform law's other early enactments such as the one requiring that insurers offer to extend coverage to young people up to age 26 on their parents' policies.