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Health Insurance for High-Risk Individuals: A Solution with Problems

California has now joined 20 other states in providing temporary health insurance for people with pre-existing medical conditions.  However, only a small percentage of the estimated  400,000 eligible Californians will get help.  Moreover, it is questionable whether the funds available will cover the period between now and when the full federal program will take over in 2014.

Individuals who’ve been without health insurance for at least 6 months  because of a pre-existing medical condition will now become eligible to enroll in high risk insurance pools.  Part of the Patient Protection and Affordable Care Act (PPACA) that was passed in March, this federally subsidized program allows these people to purchase high-risk insurance at the average private market rate for their age and limits their out of pocket costs to no more than $5,950 for individuals and $11,900 for families.

This $5 billion, 4 year program is a pre-cursor to the full rollout in 2014 of a federal insurance exchange that calls for insurance companies to accept all individuals regardless of medical conditions.  Between now and then, states can run their own high-risk insurance program with federal subsidies or allow the federal government to set up and administer a program for them.  California has been granted $761 million to run their own program qualifying  individuals and contracting with private insurance companies to provide coverage.  Enrollment will begin in August and the program will be initiated in September.

There is, however, a small problem.  Richard Foster, the chief actuary at the Department of Health and Human Services, estimates that states will enroll 375,000 people by the end of this year exhausting the $5 billion allocated for 4 years by year 2012 or even 2011.  A new study by the Congressional Budget Office concurs.

What does this mean for California?.  Right now, federal law already requires employer-provided health insurance plans to accept people with pre-existing conditions.  This leaves an estimated 250,000 – 400,000 high-risk individuals in California who qualify  for the program.  However, the $761 million provided would allow no more than 30,000 to benefit.  How to close the gap?  Ironically, California, struggling with its $20 billion budget deficit has had to make drastic cuts to existing health programs.  Further help from Congress is doubtful given the growing national deficit.  This does not bode well for the future of available high-risk insurance.

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