Monday, November 23, 2009

How will excess claims cost exposure be limited for “high risk pools” under the ‘‘Affordable Health Care for America Act’’?

The Act allows for three limiting or controlling factors; the premiums charged, an annual individual deductible of $1,500, and an annual out-of-pocket expenses of $5,000 and $10,000 for individuals and families respectively. The Act does allow for higher deductables for family coverage “as determined by the Secretary”. There will be individuals, due to whatever reasons, who fail or refuse (even with penalties) to enroll in a high risk plan even with subsidized premiums. Even for those who do elect to enroll, some will not seek care since the deductibles and out-of-pocket expenses will act as a gatekeeper.

Depending on the funding sources for high risk pools, states will be required to continue funding pools at a level no less than the current level. In those states where health insurance carriers are assessed fees for funding the pool, states will be required to continue that process.

Under the Act, participation in a state high risk plan will be treated as “Creditable Coverage”. That means at some future point in time, a high risk pool participant could, conceivably, obtain coverage from a standard risk plan, either through their employer or from the individual plan market. Thus it may be possible for uninsured or for individuals with gaps in their coverage to transfer into a lower cost employment based or individual plan at standard rates as their high risk health conditions are mitigated over time.

The Act does appropriate $5 billion dollars (in excess of premiums collected) to cover administrative and claims expenses from the Treasury and does so “without fiscal year limitation”. Furthermore, the Act permits the Secretary (HHS) to reduce benefits, increase premiums, and/or establish waiting lists as a means of managing costs.

Finally, high risk pools will terminate once the Health Insurance Exchanges are established. While Health Insurance Exchanges are expected to be in place by 2012, to avoid a lapse in coverage for high risk individuals, the Secretary may authorize high risk pools to be extended beyond 2012.