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Feds Increase Costs To High-Risk Pool Members

The Obama administration has increased costs for about 38,000 people enrolled in high-risk insurance pools run under the federal health law to prevent the program from running out of money.

The pools, which started in 2010, will expire at the end of the year when new rules prohibiting insurers from denying coverage to people with pre-existing illnesses take effect. The program was funded with $5 billion.

“We have a set amount of money and we will not exceed it,” Gary Cohen, director of the Center for Consumer Information and Insurance Oversight at the Centers for Medicare and Medicaid Services (CMS), told the Senate Finance Committee Thursday. “We are doing everything we can to avoid running out of money.”

Under the changes which took effect Jan. 1, enrollees in federally-administered plans saw their maximum out-of-pocket spending limit increase from $4,000 to $6,250, according to a Jan. 31 report by CMS. Enrollees also began being required to order medicines to treat chronic illnesses by mail order after the second prescription refill.

To further control costs, last August the federally-administered plan reduced its payment rates for providers, particularly to hospitals treating a high number of enrollees. It also reduced the number of pharmacies that dispense specialty drugs in the program.

The federal government runs the plans in 23 states and District of Columbia, while individual states run the rest using federal dollars. The benefit cuts affect only those in the federally run plans.

While enrollment in the pools has fallen far short of expectations—only about 130,000 people enrolled in federal or state plans, compared to more than 300,000 projected—per capita spending has been higher than expected. The average cost per enrollee in 2012 was $32,108 per year and varied widely by state, from a low of $4,276 per enrollee to a high of $171,909 per enrollee. But a small percentage of enrollees have filed average annual claims of $225,000 per person, according to the federal government

To qualify for the program, people must have been without health coverage for at least six months and either have a pre-existing condition or been denied coverage because of a health condition.

State programs have also been under pressure. Early last year, nine states asked the federal government for more funding to make sure their high-risk pools didn’t run out of money before 2014.

According to the latest report on expenses in the program, as of Sept 30, 2011, the program had spent about $1.9 billion.