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This Article addresses how The Patient Protection and Affordable Care Act (PPACA) will deliver insurance coverage to uninsured individuals with pre-existing conditions through a mechanism known as a state high risk health insurance pool. (PPACA, § 1101)  The state high risk health insurance pools will operate temporarily, until 2014, when the new health insurance exchanges begin to operate. The Center plans to publish an Alert on the exchanges at a later time. 

About 60% of Americans receive their health insurance through an employer-sponsored group health insurance plan.  Another 27% receive their health insurance through a government-sponsored program.[2]  The rest of the population, about 13%, must purchase insurance in the individual insurance market.  Purchasing individual insurance is generally expensive, but not horribly difficult for people who have never been treated for a serious medical condition or for those without certain risk factors for diseases.  For some individuals who have a pre-existing condition, however, it can be impossible to find an insurance company willing to offer them health insurance at any price.  State high risk health insurance pools offer coverage to those who have been denied health insurance by insurance companies. 

To receive coverage through a high risk pool, individuals must meet several requirements.  An individual will be eligible to participate in a high risk pool if the person is lawfully present in the United States, has not had creditable coverage during the previous six months, and has a pre-existing condition. The law does not directly address the question of affordability of coverage through the pool, but it does state that the high risk pool provides coverage to "all individuals" who meet the definition of "eligible individual." The issue of affordability may be addressed in regulations or other guidance yet to be written by the Secretary of Health and Human Services (the Secretary).

There are several requirements for a risk pool to qualify under the new law.  The pool must provide coverage to all eligible individuals and cannot impose any pre-existing condition exclusions on that coverage.  Additionally, the risk pool must pay at least 65% of the total costs of the benefits provided and the out-of-pocket limits can be no greater than those linked to amounts for high-deductible health plans with linked health savings accounts.  Finally, the premiums must be established at a standard rate for a standard population and age rating cannot exceed a 4:1 ratio. Questions about how the 65%  of total costs and out-of-pocket limits are calculated as well as the standard rate and standard population used for establishing the premiums may be addressed in future guidance

PPACA provides $5 billion to the Secretary to establish a national high risk health insurance pool.  This $5 billion will pay claims of the pool that are in excess of what the pool collects from its members in premiums.  HHS anticipates distributing the funds based on state populations as well as actual state costs, similar to the allocation method used for the Children's Health Insurance Program.[3]  The Secretary may carry out the program directly or through contracts with eligible entities, including states or nonprofit entities.  On April 2, 2010 HHS Secretary Kathleen Sebelius sent a letter to governors and state insurance commissioners asking each state to express its interest in participating in the program. 

States can choose from several options for establishing a qualified high risk pool:

• In states that do not currently have their own high risk pool, establishing a new high risk pool,

• Operating a new high risk pool that meets the federal requirements alongside the current state high risk pools,

• Building upon other programs designed to cover high risk individuals,

• Contracting with a current Health Insurance Portability and Accountability Act carrier to provide subsidized coverage for the eligible population, or

• Doing nothing, in which case the Secretary will establish a high risk pool in the state.[4] 

HHS has gotten responses from 46 states and the District of Columbia about new high risk pools authorized under the health reform law.  Twenty-eight states said they intend to partner with HHS to administer the new program.  Eighteen states said they do not intend to partner with HHS on the new high risk pools; in which case HHS will run the program in those states.  Of the four states that have yet to respond definitively, Rhode Island and Utah have requested an application for the program and will notify HHS of their decision at a later date, while Florida and Arizona have not officially indicated their intentions for the creation of a high risk pool program.[5]

The high risk pools terminate on January 1, 2014 when people in the high risk pools become covered through the health insurance exchanges. Before 2014, the Secretary of HHS must develop the procedures for the transition to ensure that comparable coverage is offered and that there is no lapse in coverage.