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Originally published April 17, 2010 at 7:46 PM | Page modified May 6, 2010 at 11:39 AM

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Health-care law will alter high-risk pool, but just how hasn't been worked out

A national lifeline for patients who've been turned down for regular insurance is the first of many changes to health care in the next few years.

Seattle Times health reporter

Health-care timetable

Over the next three and a half years, federal health-care changes will:

• 90 days after enactment: Provide immediate access to high-risk pools for people with no insurance because of pre-existing conditions.

• Six months after enactment: Bar insurers from canceling coverage when a policyholder gets sick and from denying coverage to children with pre-existing conditions.

Bar insurers from imposing lifetime caps on coverage.

Require insurers to let adult children stay on their parents' policies until age 26.

• Within a year: Provide a $250 rebate in 2010 to Medicare prescription-drug beneficiaries whose initial benefits run out.

2011: Require individual and small-group market plans to spend 80 percent of premium dollars on medical services. Large-group plans would have to spend at least 85 percent.

2013: Increase the Medicare payroll tax and expand it to dividend, interest and other unearned income for singles earning more than $200,000 and joint filers making more than $250,000.

2014: Provide subsidies for families earning up to 400 percent of poverty level, currently about $88,000 a year, to purchase health insurance.

Require most employers to provide coverage or face penalties.

Require most people to obtain coverage or face penalties.

• 2018: Impose a 40 percent excise tax on high-end insurance policies.

• 2019: Expand health-insurance coverage to 32 million people.

Sources: McClatchy Newspapers; Speaker of the House, Congressional Budget Office, Kaiser Family Foundation

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Steve Ellison was 27, working as a graphic designer for a large company in New Jersey, when his multiple sclerosis suddenly worsened. After three emergency hospitalizations, he moved back to Washington to be closer to relatives.

Living with his parents near Auburn, Ellison was confident his medical treatments would be covered under COBRA, a federal law that allows employees to pay into a group plan for 18 months after they leave work.

But after he'd been home about two months, his insurer, having discovered a loophole, told Ellison his coverage was canceled. Within two weeks, he would be uninsured and — with a progressive immune disorder slowly destroying nerve cells in his brain and spinal cord — uninsurable.

Ellison, like thousands of other state residents have done since 1988, grabbed a lifeline known as the Washington State Health Insurance Pool (WSHIP), also called the "high-risk pool."

Insurance of last resort, it takes only those turned down for regular insurance, and can be very expensive — $462 per month for Ellison, despite his young age.

But for Ellison, whose treatment with an expensive bioengineered drug costs more than $75,000 a year, WSHIP coverage has kept him out of the hospital and out of financial ruin.

For all the political battling and harsh rhetoric surrounding the federal health-care law that passed Congress in March, each side agrees on this point: All sick people need a lifeline like this.

The catch: That care can be extraordinarily expensive.

In 2014, the new national health-care law will bar insurers from rejecting people like Ellison, who have chronic or complex "pre-existing" conditions. The law will require everyone to buy insurance, in theory diluting the high costs of treatment for very sick patients.

Until then, the law establishes a temporary national high-risk pool as the safety net to catch those who need insurance the most. For Washington state, one of 35 states where some type of high-risk pool already operates, it means an infusion of federal cash to help care for more people.

But like other aspects of the sweeping effort to overhaul the health-care system, this change is creating anxiety as those already covered worry they could lose what they have now.

New programs

The national high-risk pool is the first of many new programs that will change health insurance — and health care — during the next few years.

In a series of stories during the coming months, The Seattle Times will explore how the new law will change the way Washington residents get their health care.

In many cases, it's too soon to spell out exact details.

That's especially true when it comes to high-risk pools, where making changes is confoundingly complex.

States must decide how they want to proceed by April 30, and have some version of the federal plan up and running by July.

"It's a herculean effort to make that happen," says Kären Larson, WSHIP's executive director, who echoes a phrase repeated by many local officials these days: "The devil is in the details."

At this point, it appears the state will host two high-risk pools: the existing program, which now serves 3,557 people and has been cited as one of the nation's best, and a new federal pool.

The two are different in some key aspects.

Premiums and out-of-pocket expenses. People who buy WSHIP coverage pay premiums ranging from 110 to 150 percent of market rates for regular individual plans — a range of $140 to $2,350 for adults per month, depending on age, smoking status, income, deductible and choice of plan. But premiums only pay for about a third of the costs. The rest is subsidized by an assessment on private insurers, who pass those costs along to healthier customers.

Premiums will be less expensive for the federal high-risk pool, with plans subsidized by a $5 billion pot of federal cash. And out-of-pocket expenditures will be less than in some WSHIP plans.

Qualifications for coverage. WSHIP requires a six-month waiting period for coverage of pre-existing conditions, compared with nine months for standard individual plans. The federal plan will have no waiting period for coverage of a specific disease, but to qualify a patient would have to be completely without insurance for six months or more.

That could leave some with a tough choice: whether to drop WSHIP or other insurance to qualify for the federal plan.

A waiting period, explains WSHIP's Larson, discourages people from buying insurance only when they're sick, which would make premiums for others unaffordable. But the federal overhaul's intent is to get people covered now, particularly those with pre-existing conditions.

Costs. In both plans, older people pay more than the young. Under the state risk pool, Ellison, a young nonsmoker, paid $462 a month for a $500-deductible plan. A 62-year-old would pay $1,480 for the same plan.

In the federal high-risk pool, young people are expected to pay less than for the state counterpart. But older patients will likely pay more.

Lifetime maximum. A difference that could be significant for those facing huge expenditures, such as transplant patients: The state's risk pool now has a $2 million lifetime maximum, while the federal plan has none.

Some anxiety

Not surprisingly, those for whom WSHIP has been a lifeline are nervous.

"What I have with WSHIP is perfect," Ellison says. "I wouldn't want to change anything about it."

He's apprehensive that "our health-care system is going to go the way of the DMV," recalling a cattle-car-crowded waiting room in New Jersey and a half day spent to get a 20-minute blood test.

"I spend a lot of time in hospitals and doctors offices ... I'm one of those people who needs the most and I'm the most scared about what's going to happen."

For now, Larson says, she's confident WSHIP, which operates under state law, won't change. In fact, the federal plan may ease the financial burden on the state plan if some seriously ill people opt for it instead of WSHIP.

Still, Larson is concerned about what might happen when both pools dissolve, expected after the broad provisions of the national overhaul begin in 2014.

"Right now, in Washington, you can't buy individual coverage with the kind of coverage that WSHIP offers," she says. For example: The best individual plans on the market cap drug benefits at $3,000 a year, which doesn't come close to costs for many diseases.

While $5 billion for the new risk pools sounds huge, consider the costs: State high-risk pools together paid out nearly $2 billion in claims in 2008, according to a report by the Government Accountability Office, a congressional watchdog. Larson worries there could be enrollment limits as the cash dwindles.

For those for whom a high-risk pool has been the only option, that's scary.

Jeanne Sather, 55, has battled breast cancer for 11 ½ years. Now, with cancer in her bones, lymph nodes and lung, she's on disability, making jewelry at her Ravenna-area home and writing about her health-care journey.

For many years, the state high-risk pool was her only option, she says, and it was great coverage. But most important, if it hadn't been there, she said, "I'd be dead."

Carol M. Ostrom: 206-464-2249 or costrom@seattletimes.com

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