High-Risk Pools: What To Know

Bill Murray called it “one of the greatest conceptual scripts I’ve ever seen.” He was talking about Groundhog Day, his 1992 film that depicts a selfish, cynical TV reporter stuck repeating the same day over and over. Over the years, at least for Bill Murray fans, the title has become synonymous with repetition and monotony. This year on Groundhog Day, I’m contemplating a health policy idea that ought to go back into hiding: high-risk pools.

What are high-risk pools?

Experience and analysis show high-risk pools are an ineffective, expensive way to provide people with health insurance, particularly for low and moderate-income Coloradans with pre-existing conditions. A return to high-risk pools would be a step backward for Colorado.

Risk pools describe the way the insurance industry segments the insured population, which determines coverage and cost. High-risk pools are health insurance plans that provide coverage for those who can’t get it elsewhere. Most often they help people with a pre-existing condition — like diabetes or cancer — get insurance.

When you have a broad mix of healthy and sick people, healthy people pay more to cover costs for those in the pool who are sick. Doing the opposite — separating sick people from those who are younger or healthier — forces sick people pay a lot more while those who are healthy pay less. Most people are healthy most of the time and thus cost less to insure.

Thirty-five states, including Colorado, offered high-risk pools prior to the implementation of the Affordable Care Act (ACA). In most states, the pools were independent entities governed by their own boards and administrators, but in some states, they functioned as part of the state’s department of insurance. All relied on state funds to be financially sustainable. Nearly all of them dwindled or dissolved after the ACA passed because it prohibits insurers from excluding people with pre-existing conditions.

A national, temporary high-risk pool ran in all 50 states for a few years after the passage of the ACA to allow states time to adjust to the new insurance market rules created by the law. These pools ended in 2014.

Why are we talking about high-risk pools again?

High-risk pools feature prominently in Republican ACA replacement proposals, most notably President Trump and House Speaker Paul Ryan’s plans. The ACA’s ban on using pre-existing conditions as a condition of insurance coverage is very popular, with polls showing nearly 70 percent of people want to retain the provision. Despite this overwhelming support, Ryan’s plan would once again allow insurers to bar people with pre-existing conditions and he’d reestablish state high risk pools. To help fund them, Ryan’s plan would pump federal funding into state pools for 10 years. The plan would also cap premiums and ban waiting lists for enrollees. Republicans have yet to coalesce around a specific plan that would replace the ACA.

How would this work in Colorado?

Here’s where it really starts to feel like Groundhog Day. For nearly two decades, Colorado ran a high-risk pool, a non-profit called CoverColorado. It was an important safety net for those who couldn’t otherwise get insurance, but it was expensive for consumers, didn’t cover everyone, and required government subsidies.

According to a 2009 analysis by Colorado’s Legislative Council, about 9,200 residents had coverage through CoverColorado (and that number rose in subsequent years). Premiums were capped at 150 percent of industry standard rates. The plans required copays, deductibles ranging from $1,000 to $5,000, and there were lifetime caps of $1 million. Because the costs of health care for this population were so high, premiums did not cover the full cost. Premium discounts were available for about 30 percent of low-income households.

The state used a variety of additional funding mechanisms over the years to help pay for the program. In its final years, CoverColorado was funded through a mix of member premiums, money from the Unclaimed Property Trust Fund and fees levied against health insurers, who often passed those fees on to healthier customers. A state task force was created in 2008 to suggest long-term funding ideas, as membership and costs were expected to continuously rise. They include reducing payment rates to health providers, drawing down federal matching funds, adding fees, and modifying the premium tax credit for insurers. The General Assembly eliminated CoverColorado in 2013.

After the ACA passed, Colorado also ran a temporary high-risk pool, called Getting Us Covered. Funding for the pool came from the federal government. Like all ACA-authorized pools, Getting Us Covered had different enrollment requirements and features than CoverColorado. Major differences were lower premiums, no annual or lifetime limits, and capped out of pocket costs. Only those who had been uninsured for at least six months immediately prior to enrolling could be covered. These factors impacted the cost of running the pool.

Many who previously bought through Colorado’s high risk pool were able to buy insurance under Colorado’s health insurance exchange, Connect for Health Colorado.

What is Colorado’s prognosis if we go back to high-risk pools?

Several analyses show the past can predict the future. High-risk pools will negatively impact the people they are supposed to help.

A Kaiser Family Foundation analysis looked at the experience of high-risk pools in the states, along with the national pool. Kaiser found nearly 14,000 Coloradans were enrolled in our state pool in 2011, which was about 3.5 percent of the people buying individual insurance plans. At that time, Colorado was losing about $4,300 per enrollee.

The federally-mandated pools ran major budget deficits. This was in part because many of those covered had not had insurance for some time and thus needed more costly care. Enrollees in these plans also paid less of their costs due to the way the pool’s design. By the end of the program, net losses were over $2 billion. At one point, Colorado needed $15 million more to run Getting Us Covered, in addition to the $90 million it had already received, due to consumer claims that were nearly double the national average.

Kaiser’s findings show while high-risk pools have the potential to provide coverage to a substantial number of people, they likely will only cover a fraction of those in need and will require billions in substantial government investment.

Commonwealth Fund study also looked at ACA-mandated pools as a way to predict the future. The study’s main takeaway was that “the key lesson – and the principle on which the ACA is built – is that insurance works best when risk is evenly spread across a broad population.” This approach is what led to the design of the insurance exchanges and the requirement that everyone have health insurance.

The study finds that resurrecting high-risk pools means higher costs for state and federal budgets, fewer people covered, and plans that don’t meet the needs of the people they are supposed to serve. Commonwealth Fund generated a chart (see below) that shows just how unaffordable it would be for people making between 200 and 400 percent the federal poverty level (FPL) compared to the currently marketplace-based system.

The Commonwealth Fund study also notes high-risk pools in the past only served a fraction of those who could participate, indicating costs could be much higher than before.

The Colorado Coalition for the Medically Underserved (CCMU) recently analyzed the Ryan plan and found that its high risk pool idea, along with others, would be detrimental to our state. This is because in the past, “premiums were usually more expensive, there was often a lifetime cap on spending, and often there were pre-existing conditions exclusions so you often couldn’t get care for the thing you needed most for six months to a year after signing up.”

Some movie critics hail Groundhog Day as the ultimate story about rebirth and revision. Maybe that’s true, too. But I’m going to stick to my original thesis that like high-risk pools, it’s yesterday all over again.