Chapter 12: State Regulation of Insurance

History of Insurance

High-Risk Pools

The first state risk pool was started by Minnesota in 1976. Since then, 34 other states have established their own high-risk pools. While state risk pools represent an important means of obtaining insurance for people who otherwise cannot access it, enrollment is quite low. Minnesota's remains the largest, but covers just 1% of its population.

Each state determines its own benefits package, eligibility rules, and rates. They contract with private health insurers to offer the plans. Premium costs vary widely, from less than $550 a month in four states, to over $1,200 a month in two states. Out-of-pocket costs vary widely, too. Almost 20% of enrollees have annual deductibles of $5,000 or more.

Across 34 state risk pools, fewer than 200,000 people participate. A major reason is the high cost of premiums. Premiums are high because the people in the risk pool tend to be of high health risk and use more services. In addition to costs to the individual, state risk pools are very costly for states to administer.

The Patient Protection and Affordable Care Act (PPACA) created a temporary high-risk pool that will run until 2014. It includes current and new state high-risk pools and those run by the federal government. To address some of the cost issues, the PPACA caps premiums and infuses $5 billion in federal financial support.