Some states have told the Department of Health and Human Services that they intend to establish their own high-risk health insurance pool while others have said they want the federal government to do it. The states’ responses are part of a $5 billion program established by the health care overhaul law that is scheduled to be up and running in June and remain in place until the health insurance exchanges begin in 2014. Separately, many health insurers have announced they will ban the practice of recissions – or canceling health insurance once an individual becomes ill -- months earlier than the federal law requires.
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JACKIE JUDD: Good day. I am Jackie Judd with Health on the Hill. Insurance issues are front and center today, as the government and insurance companies deal with implementing parts of the health care reform law. Here to discuss all of this, Mary Agnes Carey, senior correspondent for Kaiser Health News, and Drew Armstrong, health policy reporter for Bloomberg News. Welcome to you both.
Drew, last Friday was the deadline that states needed to let the Department of Health and Human Services know whether they plan to administer an insurance pool for high risk individuals or if the federal government would do it. This is part of the health care reform legislation. What's been the response so far?
DREW ARMSTRONG: As of Friday, 43 states had gotten back to the federal government saying they were going to either operate their own new version of these high risk pools or let the federal government step in.
What these pools do, just as a rehash, people with pre-existing conditions in the state who cannot buy, or it is unaffordable for them to buy insurance, so the state or non-government entity will set up a way for them to be able to purchase insurance. This is a supplement to existing state programs or in some cases when there isn't one. It is $5 billion of federal money that can come in and set up these pools.
Now, states are sort of split half and half and there is definitely some political split on this. Some states that already have these high risk pools in place at the state level, they are saying hey, we have got the infrastructure here, send us the money. We have got the know-how. We have got the people. We will set up another high risk pool to get the rest of these people with pre-existing conditions into this new federally funded pool.
Other states are going to let the federal government do it. Now, there is a lot that has been made of this as politics, the real truth may be, though, this is a temporary program that is going to last until 2014.
It is not a huge amount of money spread around the states, and a lot of states may not want to set up an entire new bureaurocracy and infrastructure to care for all these people when the federal government, they think, is pretty capable of coming in and setting up these pools for them. It is just easier for the states. It reduces the burden on states. Some of it is certainly political, but some of it just may be an administrative issue.
JACKIE JUDD: You mentioned $5 billion until these are phased out in 2014, is that enough?
MARY AGNES CAREY: A lot of people are saying it is not enough. There are concerns that you may have such a demand, again this high risk pool is for people who have not been able to get health insurance for six months and a lot of them, they are very sick people and their claims may cost quite a bit, and there is concern that that money will not be enough.
And some states are worried that they will get left holding the bag. What if they enroll people, what if the money runs out, what if the federal government does not appropriate more money, if in fact it does run out? And that is some of the trepidation of fear around this program for some of the state governments.
JACKIE JUDD: And when do the pools need to be established if they are not already in the states and at the federal level of course?
DREW ARMSTRONG: Well, the states are already setting up the deadline to get the response right now. I think the actual roll out of the pool is in June. It is going to happen very, very quickly.
MARY AGNES CAREY: It is one of the earliest implementation items, and one of the closest watched because as we talked about this is kind of the first task case for the health reform bill.
JACKIE JUDD: In what way?
MARY AGNES CAREY: Well how does this, whether the federal government allows the state to do with federal dollars, whether the federal government goes into an area, how do they handle some of the sickest folks who need help? Does it work as intended? Can they build a provider network? How quick will the payments be? Will the services people need be provided? Will it go as envisioned?
Congress writes a bill with all good intentions from their proponents' point of view, and then you have to implement it.
JACKIE JUDD: See how it actually works.
MARY AGNES CAREY: And that is why people are watching this so closely.
JACKIE JUDD: One of the other early implementation issues is this notion of rescission. You have done some reporting on that, Drew. Bring us up to date.
DREW ARMSTRONG: So, there has been a lot of noise made throughout the entire health care debate on this occasional private insurer policy of somebody gets sick and then the insurer goes back through their old medical records or forms they filled out, looks for things that were inaccurate, that might have been fraudulent or say you forgot to mention some unrelated previous pre-existing condition, and then now that that person is sick with an expensive condition like cancer, drops them from the insurance role saying they misrepresented or they committed fraud. And, the insurer obviously does not have to pay their claims. They refund all their premiums and say okay, now that you are an expensive patient of ours, we are done with you.
Of course, people who are in favor of health care reform leapt on this as a major injustice, and it has been going on, saying we need insurance reform, this is the reason, look at this poor person who got cancer and then their insurer dropped them, so we had to change this.
There was going to be a ban on the policy of rescission on insurance being able to do rescissions in any way beginning in September 23rd, and Democrats in the House started putting pressure on insurers to enact that sooner. The reality is there are a number of changes that are required of insurers coming up on September 23rd covering, I think, kids on their parents' policy until they are 26. It is not expensive for insurers to implement this six months ahead of time, especially with the question of kids, you want healthy young people paying premiums.
I mean, that is great if you are an insurer. So bowing to a little bit of political pressure and say hey, we are going to go ahead and do this early, which is what they did, a lot of them wrote letters, AHIP, the insurance industry's lobbying organization, said we are going to announce an industry wide ban on rescissions. This is easy for them to do.
These are easy wins that play nice with the Democrats, makes themselves look good. They have been the villains in this entire debate politically, from the perspective of the Democrats. They are trying to turn that around a little bit right now. This is a really easy way for them to do that.
JACKIE JUDD: Generate some good will.
MARY AGNES CAREY: Absolutely.
JACKIE JUDD: Is there some protection written into the law, though, for the insurance companies who genuinely believe that some people are committing fraud?
MARY AGNES CAREY: It is outright misrepresentational, or fraud, is an exemption for them to allow rescissions practice. I think what Drew was talking about is for example someone is filing cancer claims, you look back and there was a previous medical visit to a dermatologist for a minor skin condition, and it was not in the original form that was filled out when you got your health insurance policy.
That is what they want to stop. If there is this misrepresentation of fraud, that would be grounds for it, but then again it all gets to this regulatory process, this implementing of the bill, what will that mean for a health insurer, how will they be able to use those categories? That is another thing, I think a lot of us are trying to watch very closely.
JACKIE JUDD: Okay, thank you both so much, Drew Armstrong, Mary Agnes Carey. I’m Jackie Judd and this has been Health on the Hill.