Wednesday, October 29, 2008

California high-risk pool for medically uninsurable helps fewer residents

California high-risk pool for medically uninsurable helps fewer residents

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A $75,000 benefit cap, high deductible and costly premiums make the program unavailable, ineffective or unaffordable for many. Gov. Arnold Schwarzenegger recently vetoed a bill to expand the pool.
By Jordan Rau

October 28, 2008

Reporting from Sacramento — Dave Dunlap is a Kern County trucker with a failing liver. Like about 600,000 Californians, he is too sick to qualify for private insurance on the open market.

"I'm trying to fight to get a transplant," he said. "Everyone's waiting for me to have a way to pay for it. I can't even get on the donor list until I have a way to pay for it."

California is supposed to have a solution for people like Dunlap. It is one of 35 states that arranges health coverage for people rejected by commercial companies because they have blemished medical histories.

This group -- known as "medically uninsurable" -- accounts for about an eighth of the 5 million Californians who lack health insurance. Most are self-employed, work for companies that don't provide insurance or don't have a job.

But California's publicly subsidized high-risk pool, long one of the least generous in the country, has atrophied over the tenure of Gov. Arnold Schwarzenegger -- even as the governor put the plight of the uninsured at the top of his political agenda.

Rising premiums and limited subsidies have made the Major Risk Medical Insurance Program either unaffordable, unavailable or ineffective for many of those who most need health insurance.

The program now covers about 13,000 Californians -- about 2% of the medically uninsurable.

Enrollment has dropped by almost a third since Schwarzenegger became governor.

Schwarzenegger last month vetoed a measure that would have expanded the 17-year-old pool, overruling the bill's endorsement by the pool's own governing board, most of whom he appointed.

The governor said "the only solution for our healthcare crisis" is a complete overhaul of the state's healthcare system along the lines of his $14.9-billion plan that the Legislature rejected last January as too expensive.

"We supported wholesale health reform, but this is a population that has nowhere else to go, and he's leaving them high and dry," said Elizabeth Landsberg, legislative advocate for the Western Center on Law & Poverty, a Los Angeles nonprofit.

Subscribers pay two-thirds of the pool's cost and the state about one-third. The insurers that voluntarily participate -- primarily Blue Cross of California and Kaiser Permanente -- break even.

Unlike most other states, which finance their programs either directly with tax dollars or with assessments on insurers, California's subsidies have come only from the state's tobacco tax.

Lawmakers have kept annual financing at or below $40 million a year, requiring the pool's administrators to cap its enrollment. As a result, for much of Schwarzenegger's tenure, the pool has had a waiting list of hundreds of people.

This year, Schwarzenegger and legislators provided a one-time allotment of $10 million out of fines against insurers to expand the pool's enrollment to 915 more people, including all those on the waiting list.

Even with that expansion, the pool will assist half the number enrolled at the program's apex in 1999.

One of the major obstacles is the cost of premiums, which the law sets at 125% of commercial insurance rates. More than a third of pool participants who dropped out this year told the pool's administrators that they couldn't afford it anymore. A 55-year-old Los Angeles County resident with one dependent would have to pay $11,240 in premiums and a $450 deductible this year for the cheapest plan.

Anne Walzer, a freelance graphic designer in San Francisco who is insured through the pool, said her premiums amount to 14% of her income. She said that she was diagnosed with the mildest form of multiple sclerosis.

Even though she has no symptoms and her doctor said the chance of serious sickness was minute, Blue Cross told her she was a "lifetime denial," she said.

"I'm healthy," said Walzer, 56, who said she pays $600 a month in premiums. "I hardly ever go to the doctor. I don't feel I belong in the major risk pool."

Despite its cost, California's high-risk pool is of limited use for people needing extensive medical care, such as those with cancer or chronic diseases. That is because the pool's benefits are capped at $75,000 a year, lower than the limits of any other state's pool.

Someone with hemophilia "would blow through that in a month and a half," said Doug Stratton, the outgoing chairman of the National Assn. of State Comprehensive Health Insurance Plans, an association of state high-risk pools.

Only five other states' high-risk pools have any annual benefit limits. Indeed, California's cap makes the state ineligible for between $4 million and $8 million in federal money to help finance the pool, according to a legislative estimate.

About 2.4 million Californians buy health insurance coverage directly rather than through employers. Insurers have broad discretion to reject applicants. About 20% of applicants are rejected because of their health history, said Peter Harbage, a healthcare consultant.

Harbage projected that with fewer employers offering coverage each year, the number of Californians to whom no insurer will sell policies may grow to 1 million by 2010.

"There are hundreds of thousands of people in California who can't get coverage because the individual health market is broken," Harbage said. "You're trying to fight a forest fire with a garden hose."

Stratton said the most inventive states have found ways to control the costs in their high-risk pools by careful management of chronic ailments. He said in 2002, when Indiana arranged to buy drugs for hemophiliacs at the lower prices available to the federal government, the cost of caring for 54 patients with the blood disease dropped from $19 million to $9 million.

To fix California's pool, the Legislature this year proposed placing a $1 monthly per customer fee on insurers that sell policies directly to customers. The money would have allowed the pool to eliminate the annual cap on benefits, lower premiums and increase enrollment.

Cliff Allenby, the chairman of the board that oversees the pool, told Schwarzenegger in a letter that the measure, AB 2, would "ameliorate the dysfunction" in the individual insurance market.

But in his veto message, Schwarzenegger said the fee would be passed on to customers and thus "only exacerbates their burden."

Dave Dunlap's problems have grown since he was diagnosed with Hepatitis C in 2003. Dunlap, a 54-year-old from Pine Mountain Club, about 60 miles north of Los Angeles, said the disease weakened him so much that he was in two traffic accidents and had to stop driving his 18-wheeler.

Cirrhosis caused by the infection is now in the most advanced stage, according his medical records.

His wife, Susan, said his liver has broken down so much that sometimes she can smell the odor of his body discharging toxins through his skin.

"I suppose in different phases it is controllable, but not when you're at the end," she said. "My husband is dying."

She said a liver transplant and a year of drugs to prevent his body from rejecting the new organ would cost more than $350,000.

The Dunlaps said they had never heard of the state's high risk pool, but given its premiums and benefit cap, it would be of little use to them.

"We couldn't afford it anyway," Susan Dunlap said. "I sell real estate, and obviously real estate isn't selling."

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