Health Insurance: State High Risk Pools

Publication Date: January 2006

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Health

Type:

Abstract:

In an effort to expand the options for health coverage and reduce the number of uninsured, 33 states have established high risk health insurance pools. These programs target individuals who cannot obtain or afford health insurance in the private market, primarily because of pre-existing health conditions. Also, many states use their high risk pools to comply with the portability and guaranteed availability provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA, P.L. 104-191).

In general, high risk pools tend to be small and enroll a small percentage of the uninsured. As of December 2004, 182,381 individuals participated in these state pools. They typically are operated through state-established nonprofit organizations that contract with private insurance companies to handle day-to-day operations. Although benefit packages vary across states and plans, they generally reflect health benefits that are available in the private insurance market. The majority of high risk pools cap premiums between 125% to 200% of market rates, and pools often are subsidized through insurer assessments and other funding mechanisms.

Congress has acted in recent years to fund the expansion and operation of state high risk pools. The Trade Act of 2002 (P.L. 107-210) appropriated $20 million for the creation of new pools for FY2003, and $40 million each for FY2003 and FY2004 for the maintenance of existing pools. During the 108th Congress, the Senate passed the "State High Risk Pool Funding Extension Act of 2004" (S. 2283), which would have provided federal funding for new and existing high risk pools.

Interest in supporting high risk pools has continued into the 109th Congress, motivated in part by the expiration of authorizing legislation for federal funding on September 30, 2005. H.R. 3204, the "State High Risk Pool Funding Extension Act of 2005," would authorize additional appropriations to extend federal funding of state high risk pools. The act authorizes $15 million for FY2005 in the form of seed grants to states that have not yet established qualified high risk pools. H.R. 3204 also authorizes $50 million, for each fiscal year between 2005 and 2009, in grants to states to go toward operating expenses of existing pools. The act also changes the funding formula used to allocate these operational grants. The House passed H.R. 3204 by voice vote on July 27, 2005. Once received in the Senate, the funding formula was modified further, and the bill was passed by that chamber on October 19, 2005. Two months later, the House passed H.R. 4519 on December 17, 2005. H.R. 4519 is identical to the Senate-passed version of H.R. 3204, except for deletion of mandatory funding language for FY2006. The Senate is expected to pass H.R. 4519 without change.

The House-passed budget reconciliation bill included a provision to provide $90 million for operational grants to states for FY2006 and FY2007. The Senateamended and -passed conference agreement (S. 1932) would provide $75 million for operational grants and $15 million for seed grants, distributed according to existing statutory requirements. The measure also includes conforming language on enactment of H.R. 4519. This report will be updated periodically.