A high-risk pool is, typically, a state-created, nonprofit association that offers comprehensive health insurance benefits to individuals with pre-existing health problems. This could include people who:
- Have been denied coverage in the private market due to a chronic illness (such as cancer or diabetes) or condition;
- Have found they can only access restricted coverage;
- Have a specified (in statute or regulation) high-cost condition; or
- Have been offered a policy that costs more than what is available from the high-risk pool for substantially similar coverage.
Many state high-risk pools now serve as the "fallback" option under the guaranteed portability requirement of the federal Health Insurance Portability and Accountability Act (HIPAA) for those individuals moving from qualified group coverage to individual coverage. High-risk pools are characterized by strict eligibility requirements which vary from state to state.
Various mechanisms are used to cover the costs of high-risk pools as most operate at a loss due to the expense of the population covered. Funding for high-risk pools is subsidized primarily through assessments on insurers, service charges or taxes on hospitals, or through state general fund revenues, although there are many variations on these financing mechanisms. In addition, federal grant funding (through the Trade Adjustment Act of 2002) was provided as seed money for states to set up the administrative infrastructure. Federal grants have been available to offset the losses of high-risk pools if the pool meets certain conditions.
Aside from affordability and financing, enrollment and effectiveness of high-risk pools are major issues that have been under scrutiny. For example, while some believe enrollment in these pools has been historically low, others claim the pools serve most of the targeted population. Due to the lack of funding, the state pools are also criticized for incorporating excessive exclusions (through pre-existing conditions) for the uninsurable population. Pre-existing condition limitations are not permitted for those individuals entering the high-risk pool under the HIPAA portability option.
