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A New Program Helps the Uninsured Get Coverage

How to qualify and apply for new federal high-risk health insurance pools

En español | Today the Obama administration rolls out the first major benefit of the new health care law—a federal “high-risk pool” intended to provide coverage for people who can’t buy affordable insurance because of preexisting medical conditions. The $5 billion program is a stop-gap measure that will last until 2014, when the law fully kicks in and nobody can be denied coverage on the basis of health.

Over the past three months, the U.S. Department of Health and Human Services (HHS) has scrambled to get the program up and running by July 1. People will be able to apply this month in many states and no later than the end of August in others. Coverage will typically begin at the beginning of the next month after an application is accepted.

About 30 states have chosen to run the federal program themselves, and others opted to have HHS administer it directly through a nonprofit insurance agency located in each of those states. Federal funding varies by state, according to the number of uninsured people and other criteria, ranging from $8 million each for North Dakota, Vermont and Wyoming to $761 million for California.

Several studies, however, have questioned whether this money will be sufficient to cover more than a fraction of uninsured applicants.

Thirty-four states already operate their own high-risk pools. These cover only about 200,000 people nationwide, mainly because they charge premiums that are higher than those in the open market, says Vernita Bridges-McMurtrey, chairperson of the National Association of State Comprehensive Insurance Plans and executive director of Missouri’s program. But the federally funded plan’s premiums are likely to be lower, “so consumers may elect to buy insurance now that rates are more competitive,” she says.

Benefits and premiums for the federal plan will vary from state to state because each can design its own version, subject to federal approval. States with existing high-risk pools will continue offering their own plans separately from the federal plan.

For example the Maryland Health Insurance Program, one of the largest in the country with more than 18,000 residents enrolled, offers four plans of its own. With funding of $85 million, the program expects to be able to cover 3,500 new applicants under the federally funded plan, says its acting director, Tate Showers. People who qualify for this plan must pay $1,500 of their medical and prescription drug costs up-front as an annual deductible. “But once they reach that, we pay for everything,” she says. Until the end of the year enrollees pay nothing more for services as long as they go to the plan’s in-network providers. Monthly premiums range from $141 a month for people under age 30 to $354 for those over 65, with someone age 55 to 59 paying $302. Maryland’s plan is “pretty generous,” Showers says.

Still, federal plans in some other states are likely to be far more expensive. California, for example, will also offer a federal plan with a $1,500 deductible, but after that is met enrollees must pay 15 percent of the cost of medical services, and a person age 50 can expect premiums of $575 a month. Other states may require even higher rates—up to $900 a month for older people, according to HHS. And although even these premiums may be lower than those charged in the commercial insurance market, they may still be unaffordable for many people, consumer advocates say.

From the consumer’s point of view, this is how the new program works according to federal and state officials:

Who qualifies for the federal high-risk pool program?

The new law specifies that you must have been without health insurance for at least six months before you apply, have at least one qualifying preexisting medical condition, and be a U.S. citizen or a legal resident.

How do I apply?

You must apply to the federal program provided in the state in which you live. The new HHS website provides contact information—phone numbers and websites—for each state. Click on the link labeled “Pre-Existing Condition Insurance Plan.” If you don’t have computer access, call your state’s department of insurance for information.

How do I prove that I qualify?

It depends on your state’s regulations: 

Proving non-coverage: You will need to attest, on the application form, that in the previous six months you have not had “creditable health coverage” from employer group insurance, COBRA, individually purchased insurance (including insurance acquired through state programs) or public coverage such as Medicare, Medicaid and veterans’ benefits. You will also need to provide evidence that you’ve been turned down by an insurance company. If you live in one of the few states that already require insurers to accept people with preexisting conditions, you need to show that their rates are significantly higher than the federal plan’s premiums.

Proving preexisting conditions: You will need a doctor’s letter confirming that you have at least one health condition that makes you eligible for the program. Each state has developed its own list of qualifying medical conditions, which has been approved by federal health officials.

Proving legal residency: If you are not a U.S. citizen, you will need to provide evidence that you are a legal resident (green card holder). Your state may also require you to have lived in the state for a certain length of time, whether you’re a citizen or legal resident.

Can I apply for the federal program if I’m already enrolled in my state’s existing high-risk pool?

No, because this means you’ve been insured within the last six months.

If my application is accepted, how soon will I receive coverage?

If you apply by a certain date (typically the 15th) in any given month, and you are accepted, your coverage will normally begin on the first day of the following month. As the program is only now being rolled out, your state may start accepting applications in July or in August.

What kind of benefits will I receive under the federal program?

Benefit packages vary according to the state you live in because each state is free to develop them, subject to approval by federal health officials. You will receive information about benefits offered in the federal plan available in your own state when you apply.

What will the federal plan cost me?

Again, it depends on the state you live in. Each state decides premiums, deductibles and copays, subject to federal approval.

I’m over 50. Will I have to pay higher premiums because of my age?

The law allows premium rates to be pegged to age, but they cannot be more than four times higher for the oldest people in the pool (those age 60 and older) than for young people under 30. This maximum 4-to-1 ratio is higher than the limits required under existing insurance rules in some states and lower than those in others. Some states may set the limit for the federal plan at a ratio lower than 4-to-1.

Is it true that in the federal program my expenses couldn’t be more than $5,950 in a year?

Out-of-pocket expenses are capped annually at an amount specified by law—currently $5,950 for a single person and $11,900 for a family of two or more. But the phrase “out of pocket expenses” means deductibles and copayments. It does not include premiums.

Can I get coverage for my family under the federal plan?

Every member of your family who meets the conditions (uninsured for six months, having a qualifying medical condition, being a U.S. citizen or legal resident) can apply as an individual. If accepted, each person must pay the premium required according to his or her age group. There are no special rates for family coverage.

Would the federal plan cost less than insurance I could buy through my state’s existing high-risk pool program?

Probably, but not necessarily. The law specifies that premiums for the federal plan can be no higher than the standard premium in the state for individually purchased insurance available to people who are both healthy and unhealthy. In contrast, state high-risk pools—which by definition only have enrollees with preexisting conditions and therefore higher medical costs—may charge premiums considerably higher than this standard. On the other hand, some state pools offer subsidized premiums to enrollees with income below certain levels. Enrollees in the federal plan receive no subsidies, no matter how low their income. So it’s important to compare the federal plan with whatever plans your state already offers.

What if I’m not eligible for the federal program?

If you live in a state that already has its own high-risk pool, you should find out if you qualify for that program. Eligibility rules, costs and benefits vary widely among these state plans. For example, some offer immediate coverage for preexisting conditions, whereas others exclude them from coverage for the first six or 12 months in the plan. And some states do not make it a condition that applicants must have been uninsured for the previous six months. The National Association of State Comprehensive Insurance Plans’ website provides a list of state high-risk pools, with contact information. Some state pools, however, already have a waiting list.

I currently pay for my own insurance, but the cost is crippling me. Can I drop this insurance, wait for six months and then apply for the federal program?

You could, but it would be very risky. Going without health coverage for six months could be disastrous if you suffered a serious illness or injury during that time. But another point to consider is that funding for the federal program in each state is limited, and once the money dries up the enrollment lists will be closed. So if a great many people in your state enroll in this program at the start, there’s a risk that it might not be available to you by the time you become eligible to apply.

What if I enroll in the program but federal funding to my state dries up well before 2014?

Nobody yet knows the answer to this question. Among other reports, the Congressional Budget Office has forecast that the $5 billion funding will “not be sufficient to cover the costs of all applicants” and “will probably be exhausted prior to 2013” if more than 200,000 people across the country sign up. If that happens, people already enrolled in their state’s federal plan would not necessarily see their coverage suddenly end. It’s more likely that the states—which have had to calculate how many people can be covered under the benefit packages they designed—would freeze enrollment and place new applicants on wait lists.

What happens when this program ends?

When the main provisions of the new health care law go into effect on Jan. 1, 2014, the high-risk pool program will become obsolete. You’ll be able to go through a health insurance exchange in your state to choose coverage from a menu of different plan options. Insurers will no longer be permitted to deny coverage based on health status or preexisting medical conditions. If your income is below a certain level, you’ll be eligible for a government subsidy to help you pay the premiums.

Patricia Barry is a senior editor of the AARP Bulletin who writes about Medicare and health policy issues.


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