States Rejecting Nationalized High-Risk Pools

States Rejecting Nationalized High-Risk Pools

Benjamin Domenech

Benjamin Domenech (bdomenech@heartland.org) is a senior fellow at The Heartland Institute. Domenech... (read full bio)


As states face their first major decision under President Obama’s health care law, officials remain skeptical of the ability of Washington, DC to manage and fund the new high-risk pool program. More than twenty states have decided to opt out of the federal plan, in full or in part, over these concerns.

The newly formed insurance pools were originally heralded as a way to provide coverage for uninsured individuals as a stopgap measure until 2014, when Obama’s law compels insurers to accept all applicants.

Minnesota Rejects Feds

Minnesota Governor Tim Pawlenty (R), a leading voice on health policy issues, says there are three main reasons he chose to reject the federal high-risk pool program in favor of his own state’s existing approach.

“First, philosophically, we do not want more and more things taken into Washington, DC and run by a federal bureaucracy with centralized decision-making, one-size-fits-all approaches, and big, bureaucratic systems. We want to keep as much of the policymaking discretion at the state level where it impacts. We in Minnesota have a successful, nation-leading program and model in this area, and we didn't want to turn the keys over to the federal government,” Pawlenty told Health Care News.

“Second, there were really no assurances about whether the new federal approach or standards would work or be any better than what we have now. In fact, we believe they would be worse. And third, it was likely the federal government would not finance this in a way that wouldn't prove detrimental to the states.”

CBO: Not Enough Funding

In a written response to a query from Sen. Mike Enzi (R-WY), the Congressional Budget Office (CBO) announced the high-risk pools could cost three times as was initially budgeted.

Obama’s plan provides $5 billion in funding, with coverage originally slated to be offered beginning July 1st. According to CBO Director Douglas Elmendorf, the actual pricetag could easily exceed $15 billion.

“[F]ederal spending through 2013 would probably fall between $10 billion and $15 billion.... The larger the share of costs that the program would cover, the more attractive it would be to potential enrollees and the more expensive it would be to implement,” Elmendorf wrote. “The number of people who may be eligible for the program is in the millions—much greater than the estimates of participation.”

Too Many Eligible

The program was originally designed for 200,000 individuals, but as many as 375,000 would be eligible by next year according to Richard Foster, chief actuary for the Centers for Medicare and Medicaid Services.

“By 2011 and 2012 the initial $5 billion in federal funding for this program would be exhausted, resulting in substantial premium increases to sustain the program,” Foster wrote in an April report.

Roger Stark, health policy analyst at the Washington Policy Center, says the states could run these pools far more efficiently.

“There is no reason why the taxpayers throughout the country should be paying for high-risk pools in other states,” Stark said. “States already have high-risk pools. They do not need the government to intervene in order to do that. The money has to come from somewhere. Now it is going to come from national taxpayers.”

Benjamin Domenech (bdomenech@heartland.org) is managing editor of Health Care News.

Internet Resources:

CBO Letter on High Risk Pools

http://www.heartland.org/healthpolicy-news.org/article/27894/CBO_Letter_on_High_Risk_Pools.html

CMS Actuary Report on Obamacare

http://www.heartland.org/healthpolicy-news.org/article/27696/CMS_Actuary_Report_on_Obamacare.html

Benjamin Domenech

Benjamin Domenech (bdomenech@heartland.org) is a senior fellow at The Heartland Institute. Domenech... (read full bio)