High-risk pools aren't good option for expanding health coverage

Establishing new national high-risk pools such as the pre-existing condition insurance plan (PCIP) under the Affordable Care Act isn't a good alternative to expanding ACA coverage. That's because insurance works best when payers can spread risk evenly across a large population, according to a new issue brief from the Commonwealth Fund.

Using the PCIP as an example shows that insurance coverage for high-risk pools tends to be too expensive for many uninsured consumers with pre-existing conditions, Jean Hall, director of the Institute for Health and Disability Policy Studies at the University of Kansas, wrote in the brief.

What's more, PCIP enrollees were mostly older consumers, even though younger people are more likely to be uninsured, as FierceHealthPayer has reported. In fact, 62 percent of PCIP members were at least 45 years old, showing that older consumers are more likely to develop serious health conditions as they age.

This adverse selection was at least partly responsible for the higher-than-expected cost of running the PCIP program. The costs grew so large after three years that the PCIP program had to stop enrolling new consumers in order to ensure enough funds would be available for the rest of the program, the study said.

The large amount of people who would require coverage through a national high-risk pool is another reason costs would rise. Hall estimated that about 15.4 million people would be eligible for the pool, potentially costing $123 billion each year.

"The PCIP experience provides a useful example of the types of enrollees and costs associated with a national high-risk pool," Hall wrote. "Using a national high-risk pool as a permanent alternative to the marketplace would result in many of the same cost and coverage challenges seen in PCIP."

To learn more:
- read the Commonwealth Fund issue brief