SD22 - Study on the Feasibility of Establishing a High Risk Pool in Virginia (Pursuant to SJR 126)

Executive Summary:

Senate Joint Resolution (SJR) 126 of the 1998 Session of the General Assembly directed the Joint Commission on Health Care to continue its study of the feasibility of establishing a high risk insurance pool in Virginia.

Specifically, SJR 126 directed the Joint Commission's study to include an analysis of: (i) the problems encountered by high risk individuals in obtaining affordable health insurance coverage; (ii) whether the current "open enrollment" program, a high risk pool, or other mechanism would best serve the needs of persons with high risk medical conditions; (iii) which type of approach provides the best mechanism for insuring high risk persons in terms of its impact on the health insurance market; (iv) which type of program provides the Commonwealth with the best approach to insuring high risk individuals; and (v) the practicality of administering both an open enrollment program and a high risk pool.

Based on our research and analysis during this review, we concluded the following:

• states have taken different approaches to covering persons with high risk medical conditions: (i) 27 states have established high risk insurance pools; (ii) 9 states have a guaranteed issue requirement in the individual market; (iii) 6 states, including Virginia, and the District of Columbia administer open enrollment programs; (iv) 2 states have adopted other programs for high risk persons; and (v) 6 states have not adopted any mechanism to cover high risk persons;

• Virginia's open enrollment program provides comprehensive health insurance to persons with high risk medical conditions; Trigon Blue Cross Blue Shield and Blue Cross and Blue Shield of the National Capital Area are the Commonwealths two open enrollment carriers;

• overall, the level and cost of the health insurance coverage offered through Virginia's open enrollment program are comparable to that offered through high risk pools in other states;

• the open enrollment program provides reasonable access to coverage for persons with high risk medical conditions as evidenced by the fact that, in 1997, there were approximately 21,000 Virginians enrolled in the program;

• the Commonwealth imposes a lower premium tax rate on open enrollment carriers (0.75%) than other carriers (2.25%) on premiums derived from individual subscriber contracts to subsidize the cost of the program; in 1997, this tax differential amounted to $5.4 million;

• because the cost and level of coverage available through Virginia's open enrollment program are generally comparable to high risk pools in other states, it would appear that the only reason to move away from the open enrollment program would be to change the manner in which the cost of covering uninsurable persons currently is shared among enrollees, the insurance industry, and the Commonwealth; and

• except in very limited circumstances, no state currently operates both a high risk pool and an open enrollment program; administering two programs in Virginia would be duplicative.

A number of policy options were offered for consideration by the Joint Commission on Health Care regarding the issues discussed in this report.

Our review process on this topic included an initial staff briefing, which comprises the body of this report. This was followed by a public comment period during which time interested parties forwarded written comments to us regarding the report. The public comments provide additional insight into the various issues covered in this report.