Georgia Needs A High-Risk Health Insurance Pool

By Russ Childers

An estimated 1 million of Georgia’s non-elderly residents are uninsured; at 13 percent, one of the highest rates in the country. The good news is that fewer than one in 10 of those were uninsured for more than a year, and nearly seven in 10 are employed or the dependent of an employed person.

Some individuals choose not to purchase health insurance, but many of the uninsured believe they can’t afford coverage or have not enrolled in public programs for which they qualify. Many Georgians, however, cannot buy health insurance at any price; they do not have access to insurance through their employer and have a medical condition that causes individual insurers to deny them coverage. If we help these medically uninsurable Georgians by funding Georgia’s high-risk pool, we help solve the problems of cost and access to coverage.

Thirty-two states offer high-risk health insurance pools, providing affordable, quality private health insurance options for individuals with serious medical conditions and unable to access the group insurance market. Eight more states are actively considering moving to the high-risk pool solution. Such pools serve the small but critical medically uninsurable population, providing a coverage home for very vulnerable and high-end medical care consumers. And, benefiting the vast majority, they bring stability to the remainder of a state’s health insurance market by guaranteeing that very high-risk individuals are covered in a contained, private market environment.

Of the 18 states without a pool, 13 provide other health insurance purchasing options for medically uninsurable individuals, even if their chosen methods often make such coverage unaffordable. Georgia is one of only five states that provide no insurance option for individuals with serious medical conditions.

A high-risk pool would help reduce costs for Georgia’s remaining individual health insurance consumers in two key ways: By providing insurance companies in the individual market with a predictable means of assessing risk, it would encourage greater competition in that marketplace and increased competition in any market drives down prices. Additionally, as coverage becomes more and more affordable, the incentive for healthy individuals to enter that market grows, further reducing costs for everyone.

The stabilizing presence of a high-risk pool in the individual market also benefits the purchasers of group health insurance. This affordable option for medically uninsurable people in the individual market reduces the incentive for very sick consumers to try to “game” the system and obtain guaranteed-issue coverage in the small-group market, which covers employers with two to 50 employees. The federal guaranteed-issue regulations that prohibit insurers from declining coverage to anyone in the small-group market do not cover the individual health insurance market.

The unfortunate consequence is that individuals with serious medical conditions may try to create a “group” to obtain the health coverage they need. Healthy people do not have this incentive because they are able to obtain coverage in the individual market. These uninsurable groups, which may be fraudulent, hurt the overall small-group market pool: There is no need for people to create such groups without the expectation that they will be costly high-end users of the health insurance system. A decrease in such groups could help Georgia slow the rate increase for small-group health insurance.

In any state where the subject comes up, one hardly finds anyone arguing that a high-risk pool is a bad idea. Generally, the controversy surrounds financing mechanism. Surveys of high-risk pool directors in the 32 states where the plans exist show that risk-pool premiums never cover all pool claims. That’s understandable: Risk pool rates are capped, generally at 125-150 percent of regular rates, and pool participants all have serious medical conditions. As a result, each state has established some type of funding mechanism to cover pool losses.

Of the five states that have most recently created a risk pool, New Hampshire and South Dakota fund their pool losses with an assessment on all health insurance carriers in the state, based on the number of lives each carrier covers. Maryland and West Virginia finance losses with an assessment on hospitals, while Florida recently passed legislation to create a new pool to be financed first and primarily by enrollees’ premiums, then by legislative appropriations. (However, no appropriation was included.)

Georgia needs to create a high-risk pool now to serve the state’s medically uninsurable population. But in doing so, it must learn from its predecessors and ensure there is a financing option that is an equitable, stable means of funding pool premium shortfalls.

The safety net for these uninsurable individuals will stabilize the individual and small-group insurance markets. As a result, the uncompensated health care costs that all residents must pay for through higher medical prices will be reduced.

Russ Childers sells life and health insurance from his independent agency in Americus, Georgia. He is the chairman of the Legislative Council of the National Association of Health Underwriters, America’s Benefits Specialists. NAHU represents 20,000 health insurance professionals who provide insurance for millions of Americans. The Georgia Public Policy Foundation is an independent think tank that proposes practical, market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the views of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.

© Georgia Public Policy Foundation (August 6, 2004). Permission to reprint in whole or in part is hereby granted, provided the author and his affiliations are cited.