Your Health

Prices Drop For High-Risk Insurance

A piggybank with pre-existing conditions.
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Will lower premiums for health insurance to cover people with pre-existing conditions make the policies more attractive? We're about to find out.

Experts agreed that high prices for the coverage created under the health care overhaul were partly to blame for anemic enrollment in the plans, which reached just 21,454 after several months. Hundreds of thousands of people had been expected to sign on.

But on July 1, the Obama administration reduced premiums by up to 40 percent in 17 states and the District of Columbia where it runs the new high-risk programs. It also encouraged other states to follow suit.

The reductions were possible because federal officials now have state-specific data that allowed them to more accurately peg the premiums to the rates for individual plans in the state, as the law requires, says Steven Larsen, director of the Center for Consumer Information and Insurance Oversight at the Department of Health and Human Services.

Another provision of the health reform law could help make the plans — which are aimed at people with medical conditions who can't get coverage on the private individual market — even more affordable.

Under the law, starting in 2012 insurers must spend at least 80 percent of the premiums they collect on medical claims, as opposed to administration or profit, or pay rebates to consumers for the excess amount collected.

Some insurers are already reducing premiums to meet the new "medical loss ratio" requirements. (Medical claims paid are considered losses in insurance jargon.) If tough economic times continue and people cut back on medical care, experts say other insurers may follow suit. "Plans are getting nervous about how big the rebates they're going to have to pay are," says Timothy Jost, a law professor at Washington and Lee University who's a consumer representative to the National Association of Insurance Commissioners.

If insurers lower premiums in the individual market to meet the law's new MLR requirements, that could be good news for the PCIP programs, whose rates are supposed to be no higher than standard rates in a state's individual market.

Talk about further reductions can wait for another day. "It's possible," that the medical loss ratio requirements might further depress premiums in the PCIPs, says Larsen. However, he adds, "I wouldn't care to speculate about that."

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