MARCH 2017 Insight on the Issues Experience Has Taught Us That High-Risk Pools Do Not Serve Consumers Well Lynda Flowers and Claire Noel-Miller AARP Public Policy Institute INTRODUCTION as low as $75,000,8 lifetime limits on services as low as Recent health reform proposals eliminate or weaken $1 million to $2 million,9 and limits on specific benefits the Affordable Care Act’s (ACA’s) ban on preexisting such as prescription drug coverage and behavioral condition exclusions, and instead turn to high-risk health services.10 For most people, the high costs and pools to provide health insurance coverage to people limited benefits associated with high-risk pool coverage with preexisting conditions. This means that insurers resulted in delayed or forgone care, often causing in the individual (non-group) health insurance adverse health outcomes.11 market would—once again—be able to consider a Despite enrollees’ high premiums, on average these person’s health when deciding whether and under payments covered only 53 percent of program costs. what terms to offer coverage—a practice known as Consequently, state high-risk pools often operated at medical underwriting.1 Because people tend to have a loss.12 States used various strategies to cover these more chronic health conditions as they age, a return to losses—like assessments on insurers or hospitals, medical underwriting, coupled with a greater reliance general revenue financing, and limited federal on high-risk pools (described below), would severely grants13—but most were not able to close funding gaps undermine older adults’ ability to access adequate and and were often forced to close or cap enrollment. At the affordable individual coverage.2 end of 2011, state high-risk pools enrolled only about STATE HIGH-RISK POOLS PROVIDED A WEAK 226,000 people in total, which was a mere 0.6 percent SAFETY NET FOR PEOPLE WITH PREEXISTING of the total uninsured population in the states where CONDITIONS they were operating.14 Faced with periods of ineligibility, Over a 25-year period between 1976 and 2009, high premiums, and skimpy coverage in high-risk pools, 35 states established high-risk pools.3 People with millions of consumers with preexisting conditions preexisting health conditions who did not have access remained uninsured or underinsured—paying to coverage in the individual market were eligible to unaffordable premiums for substandard coverage. purchase health insurance through these state pools.4 TEMPORARY HIGH-RISK POOLS CREATED BY To cover costs for people with preexisting conditions, THE AFFORDABLE CARE ACT FACED SIMILAR state pools charged premiums up to 200 percent of CHALLENGES rates in the individual market.5,6 In addition to higher Similar inadequacies were evident even in the premiums, potential enrollees faced other significant temporary national high-risk pool established under access barriers: waiting periods of up to 12 months for the ACA. Called the Preexisting Condition Insurance coverage related to a preexisting condition,7 annual Program (PCIP), the temporary high-risk pool was deductibles as high as $25,000, annual coverage limits intended to help cover people with preexisting MARCH 2017 conditions until January 1, 2014, when the ACA’s health left many people with preexisting conditions uninsured insurance exchanges became operational and the rule or with limited coverage before the implementation barring insurance companies from discrimination of the law.24 Proposals to weaken the ACA’s insurance based on health status became effective.15,16 protections could negatively affect millions of people Enrollment in this national pool was limited with preexisting conditions. An estimated 52 million to people who could not obtain coverage in the nonelderly adults25 have a health condition that would make them uninsurable under medical underwriting individual market because of a preexisting condition practices that were common before the ACA. Of these, and who had been uninsured for at least six about 25 million are ages 50–64.26 months.17 PCIP provided more generous coverage than most state high-risk pools: the program charged Current proposals to subsidize high-risk pools fall far people standard market rates, there were no waiting short. For example, one recent health reform bill would periods for services for people with preexisting establish state high-risk pools and allocate $3 billion conditions, enrollees’ out-of-pocket costs were capped over three years to fund them.27 Another recent at approximately $6,000, and there were no annual proposal offered $25 billion over 10 years to fund or lifetime limits on covered services.18 them.28 These funding levels are severely inadequate to cover individuals with chronic conditions who Despite being more generous than state high-risk were uninsured before the ACA. According to The pools, PCIP had significant limitations. Enrollees Commonwealth Fund, it would cost at least $178 billion did not enjoy the protections that today’s ACA a year to adequately fund high-risk pools today29— Marketplace (or health insurance exchange) plans which is unlikely in the current environment. provide. For example, PCIP plans could charge women more than men, while Marketplace plans cannot. In The ban on considering preexisting conditions protects addition, older adults in PCIP were charged premiums people of all ages. It is a particularly important that were four times greater than those imposed on protection for older adults, because as people age, they younger people for the same coverage. Consequently, tend to develop more chronic health conditions. the annual PCIP premium could be very high. One ACKNOWLEDGMENT report estimates that a 50-year-old person could face The authors thank Ellen O’Brien, PhD, independent premiums as high as $12,264 in 201119—or more than consultant, for her contributions to this Insight on the the annual income of an individual at the poverty Issues. level that year ($10,890). In comparison, plans sold in the ACA Marketplace must, by law, limit the For references go to:http://bit.ly/2nNMgsi amount they charge older adults to three times more in premiums than younger people for the same coverage.20 This critical protection ensures older adults Insight on the Issues 119, March 2017 have access to affordable health insurance coverage. © AARP PUBLIC POLICY INSTITUTE 601 E Street, NW Even though the federal government appropriated Washington DC 20049 $5 billion to states to help close the gap between collected premiums and claims, like state pools, PCIP Follow us on Twitter @AARPpolicy on facebook.com/AARPpolicy did not have adequate financing to meet the needs www.aarp.org/ppi of all who qualified for the program. Ultimately, the For more reports from the Public Policy federal government suspended enrollment as funds Institute, visit http://www.aarp.org/ppi/. fell short.21 PCIP enrollment peaked at 115,000 in early 2013.22 Overall, the program covered a tiny fraction (0.8 to 1.6 percent) of uninsured people with preexisting conditions.23 RELYING ON HIGH-RISK POOLS AS A MAJOR SOURCE OF COVERAGE PUTS MILLIONS AT RISK The ACA guarantees access to health insurance in the individual market and ended insurance practices that 2