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High risk pools - Facts you need to know

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High risk pools - Facts you need to know

High risk pools - Facts you need to know

While it is true that a majority of Americans get their insurance from their employers or through the employers of their spouse, it is also a fact that about 16% of Americans go without health insurance. Most of these people go without insurance mainly because a pre existing medical condition makes it impossible for them to obtain insurance. For these so called uninsurable class, state sponsored high risk pools may be the best bet. Currently, there are 30 states providing these pools to their members. However, before you jump into the pool, so to say, you should have an idea about its pitfalls.

In most states, the problems affecting the individual market also affects these pools. These may include expensive coverage, a long waiting period for pre existing conditions and limited benefits. A few states have addressed the problem by increasing funding for enrolments and comprehensive benefits. However, most states discourage enrollments in these pools in various ways. Let us go through some of the problems which may arise when you investigate these pools.

Long waiting periods:

All risk pools usually have a waiting period before they cover pre existing conditions. These may also include the very conditions which made it impossible for the individual to secure covers from the open market. The ordinary waiting period is 6 months but in some it may go up to a year. These waiting periods are designed to deter individuals from taking up covers just to accommodate costs temporarily and then drop covers when the cause is no longer there. However, this discourages individuals from taking up covers. The member receives no coverage but has to pay the premium for the high risk pool.

Affordability:

None of the risk pools charge the standard market rates. The premiums are always higher in these pools. These range between 125% and 200% of the standard market rates. The premiums also vary with the age and other criteria. In most states, the premiums are prohibitively high, especially for the aged. This, together with long waiting periods, makes the coverage unaffordable for many Americans belonging to the middle class.

Adequacy:

Much like indemnity plans, for most risk pools, you have to make co payments and coinsurance payments. In most states, the copayment level is nearly the same as that of private insurance companies. This includes at least $500 in deductibles and 20% to 50% in coinsurance rates. There are five states where the minimum deductible for a plan is $1000 with a separate coinsurance. There are two states where the out of pocket limit is not capped. Three states have annual limits that are less than $200000 and eight have lifetime caps on amounts less than $1 million. The data indicates just how inadequate the covers are.

Additionally, coverage of important services is often not covered or at best they have restrictive riders. For e.g., ten pools do not provide maternity covers or impose longer waiting periods. Most pools impose separate restraints on mental health care.

Funding:

The risk pools must pay for those medical costs exceeding caps on premiums. The basic factor determining the affordability and effectiveness of a pool is how well they finance the costs incurred.

There is one advantage of premium payments. As health care costs increase, so does the revenue. In those states where the health companies are assessed, group insurers bear the greater burden of the costs. In 12 of these states, this problem is solved by letting insurers offset the payment against other forms of state tax liability. But this remains a long standing problem with most states.

Can high risk pools perform better than the markets?

Though the problems are spread far and wide, it would be wrong to generalize on them. Though the problems affect nearly all the pools, the degrees to which they are present vary. Some may seek to place the responsibility of correcting problems in the individual market on the risk pool. But the pool must function in accordance with the market. Pools which offer lower premiums and higher benefits would need more funding to deal with larger enrollments.

For these reasons, in most states which do provide risk pools, many people still do not have feasible covers. Among the thirty states operating risk pools, only a few have achieved the goal of providing covers to all, even the apparently uninsurable.

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