How Much Risk Will $761 Million Pay For?

The state legislature passed two bills yesterday that establish a temporary high-risk insurance pool. California currently has a high-risk pool system that handles 7,100 patients across the state. The new legislation would corral $761 million in federal funds over the next four years to create a significantly larger program.

High-risk pools are designed to insure those who can’t get health insurance. But that “uninsurable” bar is pretty low, according to legislative advocate Elizabeth Lansberg of the Western Center on Law & Poverty.

“Being uninsurable is not hard to achieve,” Lansberg said. “There are many people who just have high blood pressure or high cholesterol. But if you’re over 45 and have a pre-existing condition, it can be nearly impossible to get coverage.”

That sentiment was echoed by Peter Harbage of Harbage Consulting, a healthcare consulting group. “You can get someone who is excluded from the market for almost any reason,” Harbage said, “even a really simple one.”

Many Californians Qualify

The low bar for high risk means two things, Lansberg said. First, the prevailing opinion is that high-risk patients all have exotic, expensive-to-treat conditions, and that is simply not true, she said.

And the second thing is, since there’s a healthy mix of unusual and commonplace maladies that make people candidates for high-risk insurance, that means there are many, many Californians who could qualify for the high-risk pool.

“We know there are only 7,100 slots currently in MRMIB (the Managed Risk Medical Insurance Board, which oversees the state’s high-risk pool). There are tens if not hundreds of thousands of others who would qualify as uninsurable,” Lansberg said.

A study by the AARP estimated that between 420,000 and 790,000 Californians were uninsurable in 2008.

Those numbers would swamp the new high-risk pool, which is estimated to be able to take on an additional 16,500 to 45,000 Californians.

“There needs to be more money here than has been budgeted,” Harbage said.

“You’re still talking about a small part of the problem, but for people for whom this is a problem, this is going to be tremendously helpful,” he said. “It could be the difference between getting the care you need, and not.”

The New Structure

There are some major differences between the state MRMIP (Major Risk Medical Insurance Program) and the new federal high-risk program.

The state program currently has a $75,000 annual limit, and a lifetime limit of $750,000. That goes away with the federal version, according to Jeanie Esajian, MRMIB’s deputy director of legislative and external affairs.

“There is no annual or lifetime cap on benefits (with the federal plan),” Esajian said. “And there’s a $1,500 calendar year deductible, except for preventive care. The California program, it’s at $500.”

But that elimination of an annual or lifetime cap — which fits the national health care reform model — does not apply to the 7,100 people currently enrolled in the state plan. And patients in the state plan aren’t allowed to just switch high-risk coverage to the federal version.

“We can’t grandfather people into the federal high-risk pool,” she said. “Patients need to be 6 months bare of coverage to qualify.”

At first, Esajian said, the plan was to fold the federal program into the two-decades-old state program. “We thought we’d be running one pool, but we’re going to run these pools side by side.”

The biggest difference, though, is that the current state system pools coverage from Kaiser, Anthem Blue Cross and other health insurance organizations. The new federal plan will be a PPO, which means the program is basically its own insurance company, using a PPO provider pool of physicians, hospitals and other providers, as well as setting up a pharmacy benefit manager.

“The overall benefit design would be similar to what we’ve been doing,” Esajian said. “But the structure is really different, so it’s taking us a little longer to set it up.”

And the last big change, she said, is that the state pays a smaller share in the current plan than the federal government pays in the new plan. It goes from 40-60 to a 65-35 split. That is, the state currently puts in 40% of policy coverage, with subscribers picking up 60%. Under the federal plan, the federal government pays 65% and subscribers only pick up 35%.