As High Risk Pool Coverage Ends, Coverage Gaps Could Arise for Some Enrollees

As ACA implementation unfolds, millions who had inadequate coverage in the individual market will gain more comprehensive coverage that provides greater financial protection from high health care costs. Tens of millions more will be newly insured under plans that must meet minimum standards for adequacy and affordability.

One group that will be transitioning to new coverage is individuals enrolled in state-run high risk pools, many of which are closing down.  Thirty-five states operate high-risk pools to provide coverage to people who have health conditions that made them uninsurable in the commercial market. These pools cover 225,000 people who, under the ACA, will no longer be discriminated against because of their health status. Starting January 1, insurers are prohibited from denying them coverage, charging more, and imposing pre-existing condition coverage exclusions on their policies. Because these individuals will no longer be “uninsurable,” many states have decided their high risk pools are no longer necessary and plan to shut them down by the end of this year. However, because high risk pool enrollees have such significant health care needs, their transition to new coverage raises potential concerns, especially for those who use their high risk pool plan to supplement their Medicare coverage.

The first concern is how smooth the transition will be for those applying for subsidized coverage in a health insurance marketplace. Under the ACA, high risk pool coverage is considered minimum essential coverage (MEC). In general, if an individual is eligible for MEC they are disqualified from getting premium tax credits through the marketplaces. However, the Obama  Administration has made an exception for those eligible for high risk pool coverage –  as long as they are not enrolled in the high risk pool, they can qualify for a premium tax credit (assuming they meet income eligibility and other requirements). The expectation is that high risk pool enrollees would move seamlessly from the high risk pool at the end of December 2013 to marketplace coverage on January 1, 2014. But it’s not totally clear how this would work in practice.  The application for marketplace plans merely asks if applicants have other coverage and if so, what kind. There is no clear way for applicants to indicate that the coverage they have will end so they can enroll in a marketplace plan with a premium tax credit. This coordination – between the end of their high risk pool plan and the start of their marketplace plan – must work smoothly for high risk pool enrollees, whose health care needs mean that going without coverage is not a realistic option.

A second concern is whether there are adequate options for supplemental coverage for a subset of high risk pool enrollees who also have Medicare coverage. Under federal law, no issuer can sell a major medical policy to a Medicare enrollee. This policy – which was intended to prevent Medicare beneficiaries from being duped into buying duplicate coverage – was reaffirmed in a recent FAQ on the health insurance marketplaces, meaning that anyone eligible for Medicare will not be able to obtain a health plan, whether inside or outside the marketplaces.

Up until now, 19 states have allowed Medicare beneficiaries under age 65 to buy high risk pool coverage to supplement their Medicare coverage. The share of enrollees affected can be small; of the 19 pools, most have fewer than 10 percent with Medicare coverage. But in a handful of states, the impact is greater, with anywhere from one quarter to one half of enrollees relying on high risk pool coverage to supplement their Medicare coverage, according to National Association of State Comprehensive Health Insurance Plans. This can include people who qualify for Medicare because they have End Stage Renal Disease (ESRD) and those who have serious conditions such as HIV or hemophilia that qualify them for Medicare based on disability. Because traditional Medicare Parts A and B exposes beneficiaries to substantial cost-sharing, high risk pool coverage provides critical financial protection to individuals with significant health care needs.  For example, people with hemophilia who need clotting factor that can cost about $50,000 a month would be required to pay Medicare’s 20% co-insurance out of pocket if they can’t obtain supplemental coverage.  So while the number of people affected is relatively small, the implications for their access to care and out-of-pocket costs can be significant.

The usual options for Medicare supplemental coverage to reduce Medicare cost sharing are limited for those who are under 65. Most Medicare beneficiaries (93 percent) purchase a Medigap policy, have coverage from a former employer, have coverage through Medicaid, or enroll in a Medicare Advantage plan. However, federal law only requires insurers to guarantee issue Medigap policies to Medicare beneficiaries who are 65 and older. States can set Medigap requirements for those under 65, and 30 states have guaranteed issue for Medigap. But that means that, in 20 states, high-need Medicare beneficiaries under 65 may be unable to obtain a Medigap policy.

Some of these individuals may be able to purchase a Medicare Advantage (MA) plan, but under federal law, Medicare beneficiaries with ESRD are barred from buying an MA plan. And though most beneficiaries have access to MA plans in their area, beneficiaries in rural areas have more limited access.

For those with significant health care needs, purchasing another major medical plan may actually be more affordable than paying Medicare’s out-of-pocket costs. But because federal law bars Medicare beneficiaries from accessing such plans, to date the only option for many has been their state’s high risk pool. In anticipation of these transition issues, states have taken a variety of approaches to help high risk pool enrollees maintain adequate and continuous coverage. While about a dozen states plan to close their high risk pools by January 1, 2014, some are remaining open for a few months or more into 2014. For example, Connecticut has no plans to discontinue coverage for current and new enrollees. Washington will remain open indefinitely for Medicare enrollees and for new enrollees who qualify for Medicare with ESRD or without a reasonable choice of Medicare Advantage plans.  And Indiana just announced plans to remain open another month, until January 31, 2014, to give enrollees more time to transition to other coverage.

But these state responses are limited, and keeping high risk pools open for a shrinking population of the most costly enrollees will be difficult and costly to sustain.  Federal policymakers could help ensure Medicare beneficiaries who will lose high risk pool coverage will have adequate protections and choices across all 35 states.  And state and federally facilitated marketplaces should work on communication and policy strategies to help make the transition from high risk pool coverage to marketplace coverage as seamless as possible for current enrollees.