Reform could mean end to state health care pool

Lynn Gruber is monitoring the health care debate in Washington more closely than most people. If Congress passes legislation this year or early in 2010, it could mean the end of organizations like the one she heads.

And that could be a good thing.

Gruber is president of the Minnesota Comprehensive Health Association (MCHA). It's a health insurance plan created by the Legislature in 1976 for people who've been rejected by private insurers because they have cancer, diabetes, heart disease or other costly conditions.

With 27,000 members, it's one of the oldest and largest of 35 high-risk pools in the country, all set up over the years by states to provide a safety net for those who are medically "uninsurable."

The proposed federal legislation would stop health insurers from denying coverage to those with pre-existing conditions -- one of the industry's most controversial practices -- while also requiring everybody to buy health insurance. If insurers can no longer reject applicants, then organizations such as MCHA would become obsolete. Health reform could offer people with pre-existing conditions more plan choices, although there remain many questions about the timing and cost of the new options, Gruber said.

"Our goal is to have 27,000 members transitioned into the new world of federal health reform as it happens," she said.

The change could be timely because MCHA -- and the health insurance market itself -- are beset by cost trends that may be unsustainable.

For more than three decades, MCHA has been the insurer of last resort for people such as Kerry Koestler of Mankato.

After Koestler left his job at an imprinting company in 2002, he looked for an individual policy.

Blue Cross and Blue Shield of Minnesota wouldn't cover him because of his diabetes -- a pre-existing condition.

"I knew I'd be denied," Koestler said. "To me, it was a formality." With the denial letter, he could then apply to MCHA.

Koestler is now self-employed as a claims adjuster. His family of four pays $10,980 a year for coverage.

For one thing, premiums are about 20 percent higher than for a comparable policy in the individual market -- unaffordable for some. But those who sign up often have no choice. Many are self-employed or work for employers who don't offer group insurance. Because they often have high medical costs, it would be worse to be uninsured altogether.

"For those who get their insurance through us, for sure it is lifesaving," Gruber said. However, "not everybody can afford our premiums or they struggle to pay them."

A second challenge is that MCHA premiums cover only about half the cost of care for this group of individuals -- and that cost is rising.

In 2008, MCHA spent $136.5 million more paying for medical care and administrative costs than it collected in premiums and other revenue. In 2009, those losses are projected at $150 million.

To cover the shortfall, insurance companies pay an assessment, which they pass on in higher premiums -- by 2 to 3 percent -- to those with individual and small-group policies.

Over the years, MCHA has provided an inverse barometer to how well the private insurance market is working.

When the economy is good and people have access to other coverage, MCHA's membership goes down. In a bad economy, as more people lose their jobs and group coverage, membership goes up.

After hitting an all-time high of 35,000 in 1993, membership fell because of a good economy and insurance industry reform. It rose again between 1998 and 2003 during an economic downturn.

Since then, the picture has been a little more mixed.

Membership has been falling steadily from 33,705 in 2003 to about 27,000 today, in part because those who used to buy Medicare supplement plans through MCHA have switched to new products introduced in recent Medicare reforms.

Between January and October 2009, more than 5,000 members left MCHA. About the same number of new members joined during that period. A significant proportion of those who left -- 11 percent -- said it was because they couldn't afford the MCHA plan anymore.

"Not good news," said Gruber. "Enrollment is decreasing and losses are increasing."

Gruber would like to broaden the sources of funding for MCHA, an issue she may try to take to the Legislature next year. Meanwhile, she's keeping one eye on Congress.