State moves toward high risk health pool proposal deadline near

July 2, 2010
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Michigan’s nonprofit health insurers face a Wednesday deadline to submit bids to provide coverage for uninsured high-risk individuals and a share of the $141 million allocated to the state under federal health care reform.

The state’s request for proposals gave health insurers until July 7 to respond.

Enrollment is expected to begin by Sept. 15, with coverage to begin in October, said Jason Moon, spokesman for the state Office of Financial and Insurance Regulation.

The temporary pool is aimed at those who have been without insurance for at least six months and have a pre-existing condition.

The Patient Protection and Affordable Care Act sets aside $5 billion to support coverage for high-risk individuals until 2014, when insurers will be prohibited from denying coverage based on pre-existing conditions for adults, and health insurance exchanges are to open.

Michigan is slated for $141 million, according to U.S. government website healthreform.gov.

“We are looking to stretch the available federal funding to as many people as we can with the highest amount of coverage,” said Jason Moon, spokesman for the state Office of Financial and Insurance Regulation. “The plan’s coverage is more comprehensive, compared to products currently available in the individual market.”

He said the federal money will be distributed to the winning bidder or bidders to offset higher administrative and medical costs related to covering those who may rack up bills that are much higher than average. Neither the insurer nor the state budget bears risk under the program, he said.

Grand Valley Health Plan President and CEO Ron Palmer said last week the for-profit Grand Rapids HMO is weighing whether to submit a bid. The major question, he said, is how long the federal money may hold out.

From the insurer’s perspective, “it’s basically a no-risk program,” Palmer said. It may be especially attractive to health coverage organizations owned by hospitals that are happy to treat pool-covered patients rather than face bad debt for those big bills, he added.

The true risk lies in whether to trust the federal government’s funding promise, he said.

“They have apportioned $5 billion for the program, and the best guess is that’s not going to last longer than a year, and they are going to need at least another $10 billion,” Palmer said.

“What happens if the federal government doesn’t appropriate the other $10 billion? There you are, with this enrolled member, who will most certainly exceed the premiums this person has paid. There’s another whole question:  What happens to these people when the program is dissolved?’

He said there also is a concern about the state’s readiness to administer the program.  

Representatives from the area’s two largest health insurers, nonprofits BCBSM and Grand Rapids-based Priority Health, said it is too early to comment.

“The question is, what will happen when that (money) runs out?” asked James L. Gilbert, president of Creative Benefit Systems Inc. in Grand Rapids and past president of the West Michigan Association of Health Underwriters.

The pool may end up being available to a limited number of uninsured high-risk individuals, he said.

The Congressional Budget Office’s review indicates that if more than 200,000 of the millions of eligible people enroll, the money will run out before 2013.

Michigan is one of 17 states without a high-risk pool, which provides health coverage for people whose past medical history makes them more expensive to insure in the individual market. In lieu of a pool, state law requires BCBSM to accept anyone regardless of health status.

High-risk pools, often funded by a combination of insurance company funds and state funds as well as premiums paid by the individuals, are found in 35 states. Only about 199,000 people are enrolled in high-risk pool programs across the states that have them. About 20 states that have pools are setting up a second one under the PPACA.

A state could opt to run the pool itself or to allow the federal Department of Health and Human Services to handle it.

Moon said the number of Michiganders who could be served by the pool depends on the cost-effectiveness of the bids. The state has more than 1 million uninsured residents.

Nationwide, an estimated 5.6 million to 7 million people may qualify for the temporary pools, but because of financial constraints, the number who might actually receive pool coverage is about 200,000, according to the National Institute for Health Care Reform.

In the Michigan program, insurers may bid to cover the entire state or county-by-county, as long as the bidder can offer an appropriate network of hospitals, doctors and other health care providers, according to the request for proposal.

BCBSM covers about 190,000 Michiganders under individual policies, although not all of them have pre-existing conditions that have prompted other insurers to reject them. OFIR reviews the rates.

BCBSM is projecting individual market losses of $60 million for 2011, blamed largely on being required to insure Michigan’s sickest residents, and has requested a 15 percent rate hike. Insurance Commissioner Ken Ross approved a 22 percent increase last year after BCBSM requested an average rise of 56 percent.

Ross in June stalled on this year’s BCBSM rate request by asking for additional information on the rate-setting process.

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