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Before Obamacare, patients with preexisting conditions were ‘out of luck’

High-Risk Pools

More than 30 other states dealt with preexisting conditions by setting up what are called high-risk pools, a separate insurance plan for individuals who couldn’t get health coverage in the private market.

These plans could be lifesavers for some people with conditions like cancer — which can cost tens if not hundreds of thousands of dollars to treat.

The experiences with high-risk pools varied, but states faced challenges, said John Bertko, an insurance actuary with the state of California. And the main problem was the high cost.

“The one in California, which I was associated with, limited annual services to no more than $75,000, and they had a waiting list. There was not enough money,” Bertko said. “The 20,000 people who got into it were the lucky ones. At one point in time, there were another 10,000 people on a waiting list.”

The pools also had catches: Premiums were expensive, as were out-of-pocket costs. And plans often excluded the coverage of preexisting conditions for six months to a year after the patient bought the policy.

New Jersey: Preexisting Conditions Covered, With A Catch

Around that same time, across the Delaware River, the state of New Jersey was trying something different.

“Insurers could not take health status into account,” said Joel Cantor, director of Rutgers’ Center for State Health Policy who has been analyzing the New Jersey experience.

Before the ACA, New Jersey was one of just a handful of states that prohibited insurers from denying coverage to people with preexisting conditions. Insurers also weren’t allowed to charge people significantly more for having a health issue, and the plans had to offer robust coverage of services.

There was a one-year waiting period for coverage of a preexisting condition, but a larger issue became cost. The entire individual market in New Jersey became expensive for everyone, regardless of their health status, Cantor said. Because there was no mandate to have health insurance coverage, those who signed up tended to need it, and healthy people did not enroll.

And so, “the prices went up and up,” he said. And the premiums and enrollment “went down and down.”

The state tried to address this in the early 2000s by introducing a “skinny” health plan, Cantor said.

“By that I mean very few benefits,” he explains. “It covered very, very limited services.”

The plan was affordable and really popular, especially among the young and healthy people, and about 100,000 people signed up. But if a person had a health need, many costs shifted to the individual.

“It left people with huge financial exposure,” he said.

That’s, in part, why the ACA included a rule that insurance plans now must offer good benefits and be available to everybody. In exchange, insurers have the mandate and subsidies — so that everybody will buy in.

Cantor said these experiences point to an ongoing quandary: A small portion of people consume a big chunk of health care costs. It’s hard to predict who will cost a lot — or when.

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Kaiser Health News, a nonprofit health newsroom whose stories appear in news outlets nationwide, is an editorially independent part of the Kaiser Family Foundation.

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