Most people are finally beginning to realize that if they have even the most minor of preexisting health problems, they probably won’t qualify for health insurance; if they do qualify, the insurer won’t cover them for the ailments they already have. That’s right: in America, if you need insurance to cover a particular illness, you might not get coverage. Perverse, isn’t it? That’s because private insurance companies run the show, and their sine qua non is risk selection—choosing to cover only the healthiest people, those who are unlikely to file claims and cost companies money. Risk selection is most important in the so-called individual market, where those without employer insurance, Medicare, or Medicaid must buy their coverage. That’s the market where McCain wants to send more people when his proposals for weaning workers from the boss’s insurance policy take root.
Earlier this year, Elizabeth Edwards attacked McCain, saying that neither he nor she would qualify for insurance under McCain’s plan. Both have had cancer, which makes them persona non grata at the House of Aetna. McCain responded on ABC’s This Week: “We’re not leaving anybody behind.” So it’s worth examining McCain’s plans for bringing everyone on board. He has proposed something called a Guaranteed Access Plan (GAP), which most closely resembles the high-risk pools that have become dumping grounds in thirty-four states for sick people insurers don’t want. High risk pools originated in the 1970s as the industry’s answer to national health insurance. Then, like now, health reform was high on the public agenda. While the number of enrollees has grown from 55,500 in 1990 to 207,000 today, the number of uninsured tops 47 million, so pool coverage is the proverbial drop in the bucket.
“They haven’t been very successful,” says Mila Kofman, Maine’s superintendent of insurance. “They are certainly not the starting point. If the goal is to provide coverage that works and is affordable, there’s no evidence that risk pools have done that. They’ve done just the opposite.” Coverage tends to be expensive—twice as high as standard rates in some states. Deductibles may be high; in Arkansas, they can reach $10,000. Some states limit enrollment, so there may be waiting lists; more than 600 people are currently waiting in California. Once in, participants may face another waiting period, from ninety days to one year for pre-existing conditions—ironically, the very health problems that qualify them for pool coverage in the first place. A few years ago, Kofman studied how diabetics fall through cracks in the insurance system. She and her colleagues discovered that, of 340 diabetic patients who lived in states with a high risk pool, only seven patients actually enrolled. The rest found coverage unavailable, unaffordable, or inadequate for their needs.
With the number of diabetics growing, easy access to health insurance is a real concern. Premiums paid by those in the pool don’t cover the costs of providing the care, so states have to make up the difference, either through state funds or assessments on employers, hospitals, or insurers. In 2002, the federal government made matching payments available to expand coverage through high risk pools. But eighteen of the nineteen states that received grants in 2003 used the money to pay for existing programs instead of to finance coverage for new enrollees.
Like most of McCain’s health proposals, the GAP hasn’t received much press. The Wall Street Journal offered readers a pretty fair assessment of the problems currently facing risk pools and raised the $64 question: How much will McCain spend to subsidize coverage?
The New York Times approached the story anecdotally, telling readers about a man who turned down pool coverage in Maryland because it was too expensive, and a couple who said the Maryland pool was a godsend—the ying and the yang of the risk pool business. The Times also raised the cost issue, giving the impression that the McCain camp was no longer sure how much their high-risk proposal would cost. In April, McCain’s domestic policy adviser said it would cost between $7 and $10 billion, but he told the Times that projections “could change dramatically” depending on how the program was structured. In other words, who will be left out and how much of the cost those in the pool will shoulder in the form of waiting periods, deductibles, and lifetime caps on payouts. These are details about which voters should have some clue as they weigh the candidate’s proposals.
Maybe they will take a hint from the insurance industry trade group, America’s Health Insurance Plans (AHIP), which, as it did in the 1970s, is advocating a risk pool solution—albeit with variations on the theme. AHIP’s Web site gives a head-spinning description of its proposal—one that could become a bureaucratic nightmare for consumers while keeping insurers in the risk selection game.
Diagrams show that consumers must first apply to an insurer’s health plan that gets an initial shot at insuring them if they are healthy. (The insurer gets the business if it’s good business.) If the insurer turns consumers down, or offers coverage at substandard (very high) rates, the consumers apply to the state guaranteed access plan, which determines how much a person’s ailments will cost the plan. If the state access plan finds that a consumer’s expected claims are 200 percent below the statewide average, the state plan denies coverage and sends the person back to the insurance company, which will then issue a policy with higher premiums. But if the claims are expected to exceed 200 percent of the state average, the guarantee access plan assumes the coverage. Whew!
The insurer is home free; it doesn’t have to cover someone on whom it might lose money. (A pretty sweet deal!) The industry palms the bad risks onto the state and keeps the good ones for itself. Apparently that’s how AHIP expects to achieve universal access to coverage. It wouldn’t be surprising if McCain, whose own plan seems vague, will look to AHIP for advice. All in all, a pretty good story.Trudy Lieberman is a longtime contributing editor to the Columbia Journalism Review. She is the lead writer for The Second Opinion, CJR's healthcare desk, which is part of our United States Project on the coverage of politics and policy. She also blogs for Health News Review. Follow her on Twitter @Trudy_Lieberman.