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Bill Funding Purchasing Pools for Risky-to-Insure Individuals Costs $355 Million, CBO Says

February 23, 2005—A bill approved by the Senate Health, Education, Labor and Pensions Committee that would extend funding for state pools that sell health coverage to risky-to-insure individuals would cost $355 million in 2005–2010, the Congressional Budget Office said in a new estimate.

The bill (S 288)—the State High Risk Pool Funding Extension Act of 2005—would cost $14 million in 2005, it added.

States created the insurance pools to offer coverage to people who can't find health benefits in the commercial marketplace because they have costly illnesses. Policies sold through the pools are very expensive and may exclude payment for certain types of care but offer coverage to the otherwise uninsurable.

The bill would reauthorize the grant program, extending funding for seed grants through 2006 and for operational grants through 2009. Under an authorization that ended in 2004, HHS granted seed money to interested states to create the pools and issued separate operational grants to cover losses from running them.

The bill would appropriate sums greater than the $355 million CBO estimate, providing for $375 million in operational grants and $15 million in 2005 and 2006 for seed grants. CBO predicts that direct spending for seed grants would total $5 million over the five-year period.

Changes to the Grant Program
The bill makes several changes in the grant program. Grants have been based on the number of uninsured residents in a state. Under the bill, the formula would be modified to give half the funds to eligible states equally, one-quarter based on the number of uninsured residents in a state, and one-quarter on the number of enrollees in its risk pool.

The bill also would eliminate the requirement that states match the amount of federal grants given to operate the pools. In another change, some of the operational grant money would have to be spent by states on premium subsidies for people with low incomes, added benefits, or an increase in the number of uninsured people qualifying for the pools. Unspent funds for these "supplemental benefits" would be distributed to other pools with operating losses.

Changes created by the bill would increase grants to smaller states like New Hampshire, home state of the measure's Senate Republican champion last year, Judd Gregg.
Joe Barton, R-Texas, chairman of the Energy and Commerce Committee has expressed interest in moving reauthorization legislation in the House.

It's unclear how the bill's price tag will affect its prospects, although it appears to have the advantage of influential sponsorship in both chambers.

The pools provide coverage to only a tiny fraction of the nation's 45 million uninsured. Together, the nation's 32 state high-risk pools cover about 200,000 people, said Karen Pollitz, a professor at Georgetown University's Institute for Health Care Research and Policy.

The federal grants cover only a portion of the cost of running the pools, which she said cumulatively run losses totaling about $500 million per year. Of the 32 pools, 13 did not qualify for grants under the expired grant program. Three of the 13 were too new to qualify.

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