I am writing today to announce the closure of the New Mexico Independent. After three and a half years of operation in New Mexico, the board of the American Independent News Network, has decided to shift publication of its news…
Quirk in federal health care law means higher premium rates for thousands
A quirk in the new federal health care law means that roughly 3,000 hard-to-insure New Mexicans will be unable to qualify for a federal program that could save them money on purchasing health coverage.
The federal program – a high-risk pool for individuals, many with preexisting conditions – starts July 1 and will be open to hard-to-insure individuals who have gone uninsured for six months. But it will not be open to those already enrolled in the state’s own high risk pool, officials confirmed.
“There will be that inequity,” Deborah Armstrong, the executive director of the New Mexico Medical Insurance Pool, said Thursday.
Known as the New Mexico’s high-risk pool, the organization was created in the 1980s for New Mexicans unable to find health insurance coverage in the private insurance market. Many participants have preexisting conditions such as cancer, and sometimes they are critically ill. Because of that they often pay more than other people when purchasing coverage in high-risk pools.
More than 7,800 New Mexicans were in the high-risk pool at the end of 2009, with roughly 3,500 of those paying discounted monthly premiums. For those with discounted premiums, joining the federal program might not represent much of a monetary benefit.
But for nearly 3,000 of those paying non-discounted monthly premiums, joining the federal high-risk pool might yield some cost savings. Those individuals currently get no discount on monthly premiums and pay the full price. What they will pay come July 1 will cost roughly 12 percent more than the rate the federal high-risk pool will charge, Armstrong said.
That quirk in the law has Armstrong and her staff telling some potential applicants to New Mexico’s program about the new federal program.
“If they are really struggling (financially) – we don’t want to tell them to go without insurance – but we are starting to tell some folks” about the federal high-risk pool, Armstrong told the Independent.
High-risk insurance pools
The quirk in the new federal health care law is beginning to make news around the nation.
Currently 35 states have their own high-risk insurance pools, meaning that tens of thousands of individuals across the country already enrolled in state programs won’t qualify for the federal program unless they get out and go without insurance for six months.
Even though some individuals in New Mexico may pay more come July 1 than those in the federal program, the disparity between the cost of belonging to a state high-risk pool and the federal one is larger in other states.
“I’m grateful that people will have an opportunity to have health coverage, but it is a burden on the people already in the high risk pools,” said Kim Holland, Oklahoma’s Insurance Commissioner.
Holland, secretary/treasurer for the National Association of Insurance Commissioners, has worked to get the word out nationally about the loophole.
In Oklahoma full-price premiums for coverage in that state’s high-risk pool will be 50 percent more than the federal program charges once it starts July 1, Holland said. And some other states have higher rates than Oklahoma, meaning a larger gap in what covered individuals pay and what those who qualify for the federal high-risk pool will pay.
Holland said she expected states to try to address the problem over the year or so. The federal high-risk pool is a temporary stopgap for hard-to-insure individuals that lasts until 2014, when many of the new health care law’s provisions take effect, she said.
High-risk pool is a “last resort”
In New Mexico, those paying full monthly premiums in the state’s high-risk pool face shell thousands of dollars each year for coverage.
A family of four — both parents aged 40 and with two children under 18 — currently pays roughly $1,000 a month in premiums for the high-risk pool’s $500 deductible plan, according to a chart on New Mexico high risk pool’s website.
A husband and wife aged 60, meanwhile, pay $1,090 a month for the same coverage. Individuals 60 to 64 years old made up nearly a quarter of the high-risk pool’s population in December, according to the organization’s annual report.
At the same time, New Mexico begins to discount premium rates at a relatively high income. A family of four can qualify for a 25 percent discount in premium rates if they earn $87,000 in income; a 50 percent discount if they earn $65,900; and a 75 percent reduction if they earn $43,880, according to a chart on the organization’s website.
A 60 year old, meanwhile, would qualify for a 25 percent premium reduction at $43,212 in income, a 50 percent reduction at $32,382 and 75 percent reduction at $21,552.
The state’s high risk pool is a last-resort shelter for the participants, many of whom can’t get insurance in the private-sector because of preexisting conditions or because they are battling serious illnesses. As a result the high-risk pool pays out in claims much more than it receives in premiums. In 2009 it collected $19.8 million in premiums at the same time it paid out more than $88 million in medical and pharmacy claims, according to the organization’s annual report.
The high-risk pool makes up that most of that revenue gap with assessments the state of New Mexico charges health insurers to operate here. In 2009 the high-risk pool collected $66 million in assessments, making it by far the largest revenue source for the state’s high-risk pool.