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All High-Risk Pools Are Not Equal: Examining The Minnesota Model

March 19th, 2010

As House Democrats are attempting to move a health reform bill forward this week, it is worth noting that at least one part of the plan before Congress has support from Republicans, many Democrats in the House and Senate, and President Obama: high-risk pools for people with expensive or preexisting medical conditions.

High-risk pools can help hard-to-insure people obtain health insurance by putting them together in one purchasing pool and potentially subsidizing their coverage. The Senate’s version of health-reform legislation—which is the basis of the proposal the House is now considering—proposes to support high-risk pools until 2014, when they will be phased out in favor of new rules requiring that insurance companies offer coverage to people with preexisting conditions.

High-risk pools are not new; thirty-five states already have them. But just because a lot of states have high-risk pools does not mean that all are working well. Many states currently have waiting lists. Florida has stopped accepting new applicants altogether. Other states—Kansas, Louisiana, and New Hampshire, for example—have very limited eligibility criteria and enrollment. Other states’ programs have monthly premiums of over $1,000, making it difficult for people to afford to participate, and not all states offer generous premium subsidies to enrollees. Because of these limits, high-risk pools do not always reach their potential target populations.

Should the expansion of high-risk pools indeed become part of federal health reforms, elected officials might want to replicate some features of a pool in a state with relative success: Minnesota.

Minnesota’s high-risk pool, one of the largest and oldest in the country, enrolls about 30,000 people. While that is roughly one-sixth of all persons enrolled in high-risk pools nationally (an impressive amount), it is less than 1 percent of the state’s population. Still, it is viewed as an important safety net for people who might otherwise be deemed uninsurable—such as cancer survivors, hemophiliacs, or persons with HIV/AIDS. The program primarily provides comprehensive major medical plans for people having trouble obtaining coverage because of a preexisting condition.

Why has Minnesota’s High-Risk Pool Been Relatively Successful?

There are at least possible four reasons why Minnesota’s pool is more successful than those in other states:

First, eligibility is broader than in some states. Anyone who is deemed medically eligible (meaning they have been turned down for private insurance coverage because of a medical condition), HIPAA eligible (meaning a person lost previous coverage and meets other requirements), or eligible under Health Care Tax Credit criteria can enroll in the high-risk pool. Persons are also allowed to enroll under presumptive eligibility, meaning they may enter the pool with just a doctor’s diagnosis. Spouses, children, and other dependents of enrollees are also eligible to join the pool.

Second, the pool currently is adequately funded, so all those who need insurance and meet the eligibility criteria are covered. It is funded by enrollee premiums and annual assessments on companies that sell insurance policies in Minnesota (i.e., the fully insured market). At times, the pool has been supported by small state subsidies, including funding from the state’s tobacco-settlement funds. The stability of its funding and the fact that it has not had to rely as much on yearly state budget allocations has helped keep funding and enrollment steady.

Worth noting is that the current fiscal circumstances of many states may make it difficult to adequately fund high-risk pools to the degree that Minnesota has done. Minnesota’s current revenues, although by no means strong, have been hit less hard than those of many other states. Whether Minnesota will be able to maintain adequate funding for the high-risk pool during these tough financial times remains to be seen, and states with larger revenue shortfalls and a shorter history of supporting a robust high-risk pool will certainly have a harder time expanding their pools to meet a likely increase in demand. Offsetting state revenue shortfalls, however, could be the $5 billion in federal funding included in both House and Senate health reform proposals.

A third reason the Minnesota high-risk pool has been relatively successful at reaching its intended target audience is that premiums are low compared to other states’ pools. Currently, Minnesota’s premiums are capped at 125 percent of the average cost for an individual buying insurance in the private market (and premiums have averaged about 119 percent of the private individual market in recent years). Other states have much higher premium caps, with at least twelve states having caps of 200 percent or more of the standard premium rate in those states’ insurance market, making insurance through the pool unaffordable to many who need it. Keeping insurance affordable also will be a challenge for fiscally strapped states, although it is possible that federal health reform, if passed, will include subsidies to help people purchase insurance.

Minnesota has attempted to make premiums even more affordable by offering a split deductible—one for medical services and one for prescription drugs. Minnesota shares this feature with a handful of other states. It allows people who do not need prescription drug coverage to pay a lower premium. Another way the program has increased affordability is by offering two premium rates: one for tobacco users and another for nonusers. This helps encourage healthier behaviors which could also help to reduce premium costs.

A fourth reason why the Minnesota pool may be more successful is its administration. The program is a not-for-profit corporation governed by a board of directors and regulated by the Minnesota Department of Commerce. The board represents a wide range of interests and includes health care providers, hospitals, employers, insurance carriers, the Department of Commerce, and plan enrollees. Other states have similar governance structures, although not all have as much representation from consumers. The administrative structure also includes public oversight and a liberal policyholder appeal process.

Although it is hard to measure, Minnesota’s high-risk pool has probably not only helped otherwise uninsurable enrollees but has also helped to stabilize the individual and small-group insurance markets by removing high-risk, high-cost patients from their enrollment and premium calculations.

High-risk pools will continue to be an important part of states’ safety nets. Yet funding will be a challenge in many states—including Minnesota, where pool enrollees are aging and requiring more expensive medical treatments. Therefore Congress may want to assist states by providing more funding for this important component of the private health insurance market.

Following Minnesota’s lead could be a way to get high-risk pools done right.

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2 Responses to “All High-Risk Pools Are Not Equal: Examining The Minnesota Model”

  1. Malaika Stoll Says:

    In addition to insurance coverage, high risk patients need medical homes—first contact, personal care that effectively coordinates care across settings. This is good for patients, and if done right, can reduce duplication, unnecessary utilization and costs. Part of any high risk insurance pool should be direct support for practices implementing medical home models, and focused efforts at linking patients with medical homes.

    I am the Project Director of a Primary Care Initiative at a large health network in Pennsylvania. Our goal is to improve and expand primary care for our community. With an aim to reduce re-admissions, unncessary ED visits and ambulatory sensitive admissions, we are focused on improving primary care, and transition care (around admissions), for this high risk population. Supporting and training care managers in primary care practices is one strategy we are testing

  2. bett martinez Says:

    As a health insurance broker in CA I have to comment. Of the blast of calls each day I received when Anthem announced it’s huge rate increases on the individual under 65 market, I could switch about one out of 20 to other companies. The rest couldn’t qualify. And people call me for my reputation of
    knowledge to help them get through underwriting, with integrity. The other thing is with respect to choice of plans. Not too bad, if you take Maternity off the table. Which is happening here with all plans.

    For years I’ve recommended clients with healthy teens to buy them separate coverage, including maternity. Boys as well as girls. Because you never know when a young person could lose capacity to qualify for coverage. Here’s one story: a couple of years ago a client was having a child by a SURROGATE, and no company would give her health coverage, let alone something that would cover the child. fortunately we were able to switch her husband to coverage with maternity which allows guarantees that the baby would be insured no matter what her health turned out to be.

    Today, that would be very difficult. Aetna took all maternity plans off the individual market. And the rest of the companies followed suit by severely restricting what they offer, few plans, high deductibles etc. Choice you say? Much less.

    In CA we have MRMIP Major Risk coverage. when it began, a couple of decades ago, I howled. Coverage was limited to $50,000 per year, $75k lifetime maximum. Today it’s $75k per year, with $750k lifetime. Is that enough? I’m seeing accident cases with college students coming in at $3 million in the first year.

    Also, we have had long waiting periods when the pool is full. Of course, you have to ration the pool if you are limiting to sick people, generally high users.

    Standing in my shoes now, I see the problem as very complex. It does seem that extending the pool, and allowing healthy people and people for whom maternity isn’t an issue to subsidize the others is in keeping with our highest ideals as a society – or what they should be – that each of us wants what’s best for all of us, and that includes ourselves in the mix.

    bett martinez

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