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Expanding Coverage: HHS Faces a Tight Timetable in Setting Up High-Risk Pools

By Rebecca Adams, CQ Staff

April 5, 2010 -- From day one, President Obama and other proponents of a health care overhaul promised to help people with pre-existing health conditions who find it difficult, if not impossible, to get insurance coverage.

So it is not surprising that providing such coverage is one of the first parts of the new law to take effect — and it's required to happen within the next three months.

It's a daunting timetable, and the pressure is even more intense given the expectations associated with the new law. A slight delay or isolated snafus for some patients could give critics ammunition to paint the entire endeavor as a failure.

Among the problems experts foresee: How will the new federal program square with existing high-risk pools at the state level? Is there enough money to cover as many as 2 million new enrollees? Will the program be up and running by its deadline?

Building a new network of providers throughout the country from scratch — not to mention setting payment rates and signing contracts — is virtually impossible within the next 90 days. For that reason, Health and Human Services (HHS) secretary, Kathleen Sebelius announced April 2 that she would seek to build on existing state programs and where necessary, contract with not-for-profit insurance carriers as a temporary solution until 2014 when insurance companies will have to take all comers.

Yet even piggybacking on existing programs could prove difficult.

"I can't imagine how they'll push all this out in this short turnaround," said Joy Johnson Wilson, director of health policy for the National Conference of State Legislatures, predicting that HHS officials will miss at least some of the first-year deadlines in this and other programs.

Sebelius, however, discounted the difficulties, saying she had written governors and state insurance commissioners asking whether they would participate and on what basis. If they do not, she said, HHS would set up the programs.

Currently, 35 states run pools for people who have trouble buying insurance because of pre-existing conditions, although not all of the programs are accepting new patients. Coverage costs vary significantly from state to state, with 2009 premiums for a 50-year-old ranging from a low of $377 per month in Maryland to a high of $1,362 in Washington, according to the Kaiser Family Foundation, a nonprofit research organization.

But the premiums in the state pools can be much more expensive for people who are very sick — so expensive that in a nation of about 47 million uninsured people, only about 200,000 get coverage through the pools. Premiums are likely to be lower in the federal program because they would be subsidized.

Sebelius may also contract with not-for-profit insurance carriers, particularly in states without a high-risk pool. One option would be working with the plans that belong to the Blue Cross and Blue Shield Association.

However, neither Blue Cross, nor officials in the National Association of State Comprehensive Health Insurance Plans (NASCHIP), which represents administrators of the state high-risk pools, say they know how the agency will proceed. Neither does America's Health Insurance Plans, the insurers' trade group.

"We need specifics as to what the final enrollment criteria would be and what coverage options would be desired, as well as how the funding would be distributed," said Vernita Bridges-McMurtrey, executive director for the Missouri Health Insurance Pool and the chairwoman of the national group's board of directors. "I don't think any of that has been determined yet."

One of the first issues that HHS must address is whether it will require high-risk pools in every state. Six states already prohibit denial of coverage based on pre-existing conditions — a policy known as "guaranteed coverage." Another seven states have some insurance regulations that help give people with pre- existing conditions access to insurance, according to the Kaiser Foundation.

Blue Cross officials question whether Sebelius needs to create programs in states that already require insurers to offer coverage to all comers.

"The real problem is that if you're sick and uninsured and you have to buy coverage on the individual market, in [a small number of] states, there's no place to get the coverage that you need. That should be the priority," said Alissa Fox, the association's senior vice president for policy and representation.

Consumer advocates agree, saying the most important thing is whether coverage is affordable, not where people get it.

"There are a number of states that use mechanisms other than high-risk pools to guarantee coverage to people who would otherwise be uninsurable," said Cheryl Fish-Parcham, deputy director of health policy for Families USA. "Those systems are underfunded and need to be able to use federal money to stabilize premiums and keep them affordable."

Sebelius will have to decide quickly how much flexibility to give state officials. One issue that has come up is whether the new law allows expansion of existing state pools, or whether it requires states to create a second pool.

Some believe a second pool may be necessary because federal law requires applicants to have been uninsured for at least six months. However, people in the existing high-risk pools have insurance. That means they may be ineligible for the new program, which is likely to charge lower premiums, according to state officials who have raised the issue with HHS.

"We are concerned that the population in those programs who have done the right thing in buying insurance, regardless of how high the premiums they had to pay were, may very well feel penalized because they bit the bullet and paid the high rates, and then the federal program is more attractive and they don't have access to it," said Bridges-McMurtrey.

Jeanne Lambrew, deputy director of the White House Office of Health Reform, said it was "premature" to say how the issue might be resolved, but that the administration's goal was to be as flexible as possible to get people enrolled quickly.

Another question is whether the federal government is setting aside enough money to cover the program's costs. The law provides $5 billion to be spent from this year until the new exchanges are running in 2014. But according to the Kaiser Family Foundation, states with high-risk pools collectively spent roughly $900 million to subsidize excess losses for the 200,000 enrollees in 2008. Health experts say the new pools could attract as many as 2 million people.

The authors of the law gave the agency the right to stop enrolling people if funds run out. But if HHS exercises that power, the administration will face a political backlash.

Hanging over all of these issues is the time pressure. State officials say they are already besieged by calls from citizens seeking information on how to access the new program.

"It honestly is an extremely short window to establish a brand new program when you consider the pieces that have to be in place," said Bridges-McMurtrey. "A lot of work remains to be done."

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