Friday, April 30, 2010

Temporary High Risk Insurance Pool Established

(Note : For the next few weeks, Health Reform Talk will focus on detailed explanations for specific provisions in the new health reform law. Click here for previous post.)

So what’s included in Sec. 1101 of the Affordable Care Act, concerning the temporary high risk insurance pool?

A temporary high risk insurance pool program must be established for individuals who have been uninsured for six months or who have been denied a policy because they have preexisting conditions. The funding for this high risk pool program is capped at $5 billion. The program is set to end on January 1, 2014.

Timing of high risk pool. By June 21, 2010 (within 90 days after the date of enactment), the Health and Human Services (HHS) must establish a temporary high risk health insurance pool. This pool is designed to provide health insurance coverage for eligible individuals for the period from the day the program is established until January 1, 2014.

Administration of high risk pool. The Affordable Care Act authorizes the HHS to carry out a federal national high risk pool program either (1) directly or (2) through contracts with eligible entities. An eligible entity is one that: is a state or nonprofit private entity; submits an application to the HHS, at the time and in the manner specified by the HHS and containing information required by the HHS; and agrees to use contract funding to establish and administer a qualified high risk pool for eligible individuals. In addition, to be eligible to enter into a contract with the HHS, a state must agree not to reduce the amount it spends annually for the operation of one or more state high risk pools during the year before the year in which it enters into such a contract.

Qualified high risk pools. A qualified high risk pool must meet the following rules:

(1) it provides health insurance coverage, without preexisting condition exclusions for the coverage, to all eligible individuals;

(2) it provides health insurance coverage (a) in which the issuer’s share of total allowed costs of provided benefits under the coverage is not less than 65% of the costs and (b) that has an out of pocket limit not more than the applicable amount described in IRC Sec. 223(c)(2) for the year involved (note that, for 2010, the Sec. 223(c)(2) out of pocket limits are $5,950 for self-only coverage or $11,900 for family coverage);

(3) it ensures that, with regard to the premium rate charged to eligible individuals through the high risk pool, the premium (a) varies only by age, rating area, individual or family enrollment, and tobacco use, as provided under Public Health Service Act 2701, as added by the Affordable Care Act; (b) varies on the basis of age by a factor of no more than 4 to 1; and is established at a standard rate for a standard population; and

(4) it meets any other requirements imposed by the HHS.

Eligibility for high risk pool. Under the Affordable Care Act, a person is considered an eligible individual for purposes of the high risk pool if he or she:

  • is an American citizen or a U.S. national or is lawfully present in the U.S.;
  • has not been covered under creditable coverage during the six-month period prior to the date on which the person is applying for coverage through the high risk pool; and
  • has a preexisting condition, as determined under guidance issued by the HHS.

Funding of high risk pool. The Affordable Care Act provides $5 billion in funding to pay claims and administrative expenses of the high risk pool, beyond premiums collected from eligible individuals enrolled in the pool. There is no fiscal year limitation for the funding. If the total amounts available for paying expenses under the high risk pool program are estimated to be less than the program’s expenses, the HHS may make necessary adjustments to eliminate the deficit.

Termination of high risk pool program. Coverage under the national high risk pool program is scheduled to end on January 1, 2014. The HHS is ordered to develop procedures to transition eligible individuals enrolled in the high risk pool to qualified health plans offered through a Health Insurance Exchange. These procedures should ensure that there is no lapse in coverage for the individual. Further, the HHS may extend coverage after the termination of the high risk pool, if the HHS considers it necessary in order to avoid such a lapse.

Effective date. This provision is effective on the date of enactment (March 23, 2010).

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