October 16, 2006
RALEIGH – North Carolina could make health insurance more affordable for everyone by helping finance high-risk health insurance pools, a new John Locke Foundation Spotlight report shows.
Joseph Coletti, JLF fiscal policy analyst, said high-risk health insurance pools could improve the effectiveness of health savings accounts. High-risk pools could also reduce the need for traditional government-run programs such as Medicaid, he said.
“Health insurance is the only kind of insurance people buy in order to use it,” Coletti said. “We don’t buy home insurance to help pay our mortgages or car insurance to help pay for our oil changes, but we buy health insurance to help pay for our doctors’ visits.”
Coletti said individuals pay only about 14 percent of their own health care costs, with private insurers and government footing the other 86 percent. And employers usually provide coverage for their employees.
A high-risk pool would be the least disruptive way to guarantee coverage for individuals with pre-existing conditions, Coletti said. As in other insurance markets, a high-risk pool would keep premiums affordable for the small percentage of people with significant health care needs without raising costs for the entire market. Already, 33 states have high-risk pools for health insurance.
The state could fund a high-risk pool by diverting easily obtainable savings from the Medicaid program, Coletti said.
“Depending upon its enrollment requirements, a high-risk pool would cost the state between $40 million and $113 million per year,” Coletti said. “That’s a small percentage of North Carolina’s $2.6 billion annual expenditure on Medicaid.”
Coletti noted that North Carolina saved $137 million in Medicaid payments this year by freezing reimbursements to their 2004-05 levels. The state saved an additional $150 million this year thanks to an improved economy and the Medicare Plan D prescription drug benefit.
“North Carolina’s Medicaid plan is the most generous in the region,” Coletti said. “The state could save $200 million just by bringing the program in line with those of neighboring states, and those savings could help support a high-risk pool.
“And that’s not counting the $500 million that the state could save in Medicaid expenditures going for wasteful care that has no medical value,” he added.
Coletti said North Carolina could restore the tax credits, which expired in 2001, for purchases of children’s health insurance and long-term care insurance. The state could also offer a general tax deduction or credit for all individuals who purchase health insurance on their own, he said.
Joseph Coletti’s Spotlight report, “High-Risk Health Insurance Pools: A step toward an individual insurance market,” is available at the JLF web site. For more information, please contact Joseph Coletti at (919) 828-3876 or [email protected]. To arrange an interview, contact Mitch Kokai at (919) 306-8736 or [email protected].