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- Insurance companies calculate premiums by the amount of risk they face by paying a claim
- Health insurance companies may deny you coverage if they feel your pre-existing condition is high risk
- Medicaid will cover individuals and families regardless of pre-existing conditions
Most forms of insurance are based on risk factors. Insurance companies calculate how much to charge for premiums by basing how much risk the company has if they pay a claim.
This is true for auto insurance plans as well. For example, if you have several tickets or accidents, your premiums will increase, because you are considered a higher risk.
You could also have higher premiums due to age, because many people in your age group have accidents—even if you have not had an accident yourself.
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Health Insurance and Risk Pools
The same is true for health insurance. Health insurance providers calculate how much risk you have of filing claims and adjust your premiums accordingly.
For this reason, some health insurance companies will simply refuse to insure someone with a pre-existing condition, such as diabetes or high blood pressure because they know that these people are far more likely to require costly medical services.
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This has resulted in a large group of people who are considered “uninsurable.” Until recently, this group had small chance of securing reasonable health insurance premiums.
In many cases, someone losing a job or moving to a different location faced the prospect of being without health insurance simply because they lost their former coverage and were considered to have “pre-existing” conditions.
Many states, and even some private insurance companies, recognize this problem and are attempting to solve it by pool coverage.
Health Insurance Pools
Pool coverage allows a larger group of people to be put together for the purpose of statistical analysis of risk, and basically gives the same prices to everyone in the pool.
The idea is that the health problems, and frequent claims, of one member will be balanced out by the good health, and rare claims, of another.
This allows the state or the insurance company to provide everyone in the pool with relatively low-cost insurance coverage, while maintaining financial solvency.
Group plans, such as those offered by health insurance companies to large employers, have long used the pool system for both health insurance and life insurance coverage.
The reason many large employers can offer, as a benefit of employment, low-cost health and life coverage is due to the pool insurance concept.
The insurance company is willing to risk lower premiums for all members in order to gain assured payment of premiums by a large group each month, as most of these premiums are payroll deducted.
Likewise, states have become interested in offering pool coverage to individuals and families who probably could not find insurance anywhere else.
By combining the risk of all persons in the state with state-funded medical coverage, the states are able to keep premiums low and minimize overall risk.
Who is eligible for health insurance risk pool coverage?
Most states have basic requirements to be eligible for risk pool coverage. Typical requirements are being turned down by at least two major insurance companies due to pre-existing conditions and having been without healthcare coverage for a minimum of six months.
Unlike government-sponsored health care for lower-income families, risk pool coverage assumes that the individuals with pre-existing conditions need healthcare and can afford to pay, but cannot find insurance elsewhere.
If an individual or family lacks the ability to pay for insurance, then other programs are more appropriate remedies, such as Medicaid.
Under the Medicaid program, no one can be denied coverage due to pre-existing conditions.
Risk pool coverage has worked very well for large insurance companies offering plans to employers, primarily because premiums can be adjusted based on individual factors.
For example, a pool coverage policy for a large company can charge more for families than individual coverage.
In addition, they can add a surcharge for smoking or other risky behaviors to help level the cost of healthcare for those individuals.
However, state-sponsored healthcare risk pool coverage has enjoyed mixed success. In some cases, the problems have been inherent in the structure of the state plan.
In others, failure has occurred because the premiums were simply set too high for most individuals to afford coverage.
It’s no secret that many individuals will do without healthcare coverage in order to provide other “necessities” for a family, so high-cost healthcare is not likely to be popular.
To find out about risk pool coverage for your state, visit your state’s website for Health and Human Services, which sponsors the state-funded plans.
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