An existing Minnesota program has better coverage than new federal high-risk pool.
One of the first new programs under federal health reform rolled out this month, offering coverage to sick people who've been denied coverage by private insurers.
But in Minnesota, at least, it doesn't appear to offer better options than what already exists.
Minnesota has long had its own subsidized high-risk pool for those with preexisting medical conditions. A rough comparison indicates that in most cases, the state plan offers similar benefits for less money.
For example, under the state program, a 30-year-old would pay $230.71 a month for a plan with a $2,000 deductible. Under the federal plan introduced Aug. 1, that person would pay $274 a month for a plan with a $2,500 deductible.
That could become a problem for the high-risk pool the state set up 34 years ago. It means the Minnesota Comprehensive Health Association (MCHA), which requires heavy subsidies, will continue to bear much of the burden of paying for medical care for the sickest Minnesotans until 2014, when health reform fully kicks in.
The conundrum shows the difficulty in rolling out sweeping reforms across the country. Some states, such as Minnesota, already have safety-net programs in place, and may not benefit as dramatically, at least initially. But they'd still like to get something.
MCHA president Lynn Gruber said she plans to write a letter to the Minnesota congressional delegation soon to highlight the problem.
"In the majority of cases, we are cheaper," Gruber said. "Why create this federal pool if it's not broader or better than the existing high-risk pool?"
The issue is important for people in the individual insurance market, a small but growing segment that will see some of the biggest changes from health reform.
Last year, 5 percent of Minnesotans were covered in the individual market, 9 percent were uninsured, 57 percent were covered through an employer and 29 percent under government plans such as Medicare and Medicaid.
Today, when somebody applies for individual insurance, the insurer analyzes the person's medical record to estimate future medical costs. Based on that, the insurer could fix a premium or reject the person because of preexisting conditions.
The list of conditions is long and can differ from insurer to insurer. It can also change from year to year for the same insurer.
In Minnesota, people have been denied for diabetes, heart disease, obesity, previous cancer and a history of depression. Insurers do this to minimize losses and to discourage people from waiting till they're sick to buy insurance.
The federal health reform bill will make it illegal starting 2014 for insurers to reject those with preexisting conditions. Also that year, it will require most Americans to carry insurance.
Until then, the feds are creating the temporary high-risk pool, the Pre-Existing Condition Insurance Plan (PCIP).
The thing is, some 35 states already have their own high-risk pools. MCHA, for example, insures about 27,000 Minnesotans.
"It doesn't really work for us," said Abir Sen, chief executive of Bloom Health, a Twin Cities insurance broker. "This may be useful in some states where people are uninsured and they don't already have a high-risk pool. Minnesota already has a fairly good plan."
A costly undertaking
Last year, MCHA paid out $125 million more in medical and administrative expenses than it collected in member premiums. To cover the shortfall, insurance companies pay an assessment, which they pass on as higher premiums to those with individual and small-group policies, a financing structure Gruber has said is not sustainable.
The state had an option to administer the federal program, which would have meant getting $68 million from the feds to run a second high-risk pool alongside MCHA. But last spring, Gov. Tim Pawlenty declined to take part, saying Minnesota would rely on its own state program.
In a letter to U.S. Health and Human Services Secretary Kathleen Sebelius, Pawlenty questioned the viability of the federal plan, citing a report from the Centers for Medicare and Medicaid Services saying the $5 billion program could run out of money early.
And so, Minnesota became one of 19 states that chose to let the federal government run the program for their residents. Would things have been different if Pawlenty had opted in, and the state had set the premiums? Difficult to say, said Gruber, since everything still had to be approved by the federal government.
Minnesotans can still apply for coverage from the federal pool. But except for a few cases, it's hard to see why many would.
MCHA and PCIP differ in many ways, making apples-to-apples comparisons difficult. PCIP has just one deductible level -- $2,500 -- and four age bands. MCHA has several deductible levels -- ranging from $500 to $10,000 -- and 10 age bands. The higher the deductible, the lower the premium. The higher the age, the higher the premium.
But if one picks the closest comparable option on MCHA -- a $2,000 deductible, MCHA is cheaper for all age groups except those ages 50 to 54 and those over 60, for whom PCIP is cheaper.
PCIP also requires applicants to be uninsured for at least six months to qualify, which might be a hurdle for some. For those who have been uninsured for six months though, PCIP offers immediate coverage while MCHA imposes a waiting period.
Setting the premiums
PCIP premiums are set at "100 percent of the standard rate in the state," or what private insurers typically charge, said Keith Maley, a spokesman for the Department of Health and Human Services.
Gruber said she is dubious: "I don't know how that can be since our current rates are 122 percent of the market."
Maley said over 2,400 people have applied for coverage in states where the federal government is running PCIP, and over 140 were receiving coverage as of Aug. 2. Minnesota-specific numbers were not available, he said.
If the $68 million allocated to Minnesota isn't used up here, it will be reallocated to other states, he said.
Meanwhile, MCHA is gearing up to respond to another provision in the health bill. Come Sept. 23, it will be illegal for private insurers to deny coverage to kids with preexisting conditions.
MCHA is sending out letters to kids on its plan, suggesting they shop amongst private insurers to see if they can get a better deal.
Gruber said she suspects they may not.
"I think [insurers] will rate up," she said. "It's very possible the rates in the private market will be higher than MCHA's rates."
She urged parents of these kids to ask detailed questions: Which providers are in the network? Does the plan cover autism care?
As for grown-ups, judging by the premiums in the federal plan, "we think most adults will stay put in MCHA," she said.
Chen May Yee • 612-673-7434