Health Insurance:

Risk Pools for the Medically Uninsurable

HRD-88-66BR: Published: Apr 13, 1988. Publicly Released: May 13, 1988.

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In response to a congressional request, GAO reviewed 15 state-administered health insurance risk-pool programs to determine: (1) the programs' characteristics, enrollment, and financial experience; (2) the characteristics of the people they insure; and (3) their success in meeting expectations.

GAO found that: (1) risk-pool programs provide health insurance to persons who cannot otherwise obtain it because their health conditions make them unacceptable risks to private insurance companies; (2) program enrollees generally have large deductibles and their premiums are 25 to 50 percent higher than private health insurance plan premiums; (3) despite the high premiums, the programs require subsidies, and most states assess deficits against insurers doing business in the state and allow insurers to credit their share of risk-pool deficits against state premium or corporate income taxes; and (4) most of the programs consistently operated at a loss and paid an average of $1.60 in claims for each dollar of premium income in 1986, while private insurers paid $0.87 in claims per dollar. GAO also found that: (1) most states granted eligibility to persons that insurance companies either refused to cover, or to whom they offered only limited or high-cost coverage; (2) 7 of the 15 states studied allowed applicants with specified diseases to enroll without meeting other requirements; (3) most of the enrollees were middle-aged, about half of those were female, and most incurred higher-than-average expenses for heart and circulatory diseases, cancer, and diabetes; (4) although most states did not know the number of persons enrolled with acquired immunodeficiency syndrome, they believed that the risk pools could help finance treatment costs; and (5) states believed that their programs did not serve all eligible individuals.

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