Interim High Risk Pool could speed depopulation of individual market
By the time individuals become eligible to buy coverage through the Patient Protection and Affordability Act’s (H.R. 3590) American Health Benefit Exchanges on Jan. 1, 2014, the individual market risk pool could undergo a major depopulation particularly among individuals with pre-existing conditions.
According to a Kaiser Family Foundation survey released this week of people with individual coverage aged 18-64 conducted between March 19 and April 2, annual premium increases are averaging about 20 percent. Given that individual rates are already high and remain headed upward in a weak economy, such increases are unsustainable and will likely be seen in retrospect as the tipping point of market failure in the individual health insurance market. Individuals can only trade down so much before premiums for a higher deductible, less generous plan also become unaffordable. Sixty five percent of the Kaiser Family Foundation survey respondents reported they worry their premiums will rise out of reach as do 81 percent of those with medical conditions.
If premium rates for the Act’s Interim High Risk Pool provide even modest relief, it could spark a migration of those with preexisting conditions out of the individual market into the Interim High Risk Pool. The pool took effect this month and is intended to provide coverage for those with preexisting medical conditions who have been uninsured for at least six months until insurers must accept all applicants in 2014. It remains to be seen exactly what members of the pool will be charged for coverage. While the Act requires the pool to set premiums at a “standard rate for a standard population,” those premiums may also end up being unaffordable as I’ve previously speculated.
Nevertheless, individuals with medical conditions may soon be knocking on the pool’s door as this item from the New York Times Prescriptions blog illustrates. In the blog post, Deborah Chollet, a senior fellow at Mathematica Policy Research, suggests a self employed individual with cancer who fears he’ll no longer be able to afford rising premiums may wish to consider the pool as an alternative to dropping his coverage. But under the Act, he’ll have to go medically uninsured for six months in order to qualify for coverage.
There’s another aspect that bears watching. If the premiums charged in the Interim High Risk Pool are significantly lower than those charged by health plans and insurers in the individual market or lag their recently sharp premium hikes, it could produce a so-called “crowd out” effect in which individuals drop coverage for six months in order to qualify for coverage in the Interim High Risk Pool. Many — probably most people over age 45 — would meet the Act’s expansive definition of a pre-existing condition.