THE MISSISSIPPI LEGISLATURE
The Joint Committee on
Performance Evaluation and Expenditure Review
Report # 321
Executive Summary for
A Performance Evaluation of the Mississippi Comprehensive Health
Insurance Risk Pool Association
January 9, 1995
Introduction
In 1991, the Legislature created the Mississippi Comprehensive Health Insurance Risk Pool Association to provide a means of insuring persons who are denied health insurance for medical reasons. Under present legislation, the Mississippi Comprehensive Health Insurance Risk Pool Association repeals December 31, 1995.
This report poses questions and provides answers to assist the Legislature in making a decision as to whether to reenact the legislation creating the risk pool. The report also presents options the Legislature may consider with respect to the impending repealer.
Summary
Who bears the burden of paying assessments to support the risk pool?
While the pool depends on both premiums paid by policyholders and assessments against insurance companies, its assessments are made on individual covered persons of the insurance companies. Because of exemptions in statutes for state and federal employees, and the federal ERISA exemption, assessments are made against less than one-half of the persons insured in Mississippi.
How effective has the pool been in providing insurance to the market of persons who are not insured and are not insurable?
The Mississippi Comprehensive Health Insurance Risk Pool Association has provided health insurance to a segment of the eligible uninsured population (approximately one-third), but is far short of insuring the entire market.
How expensive is the pool to operate in relation to other pools?
When compared to other risk pools in the United States, the Mississippi Comprehensive Health Insurance Risk Pool Association's administrative costs constitute a higher percentage of total expenses than do similar expenses for other risk pools. The method of assessing insurers authorized by MISS. CODE ANN. Section 83-9-217 has produced pool fund balances which greatly exceed the annual costs of operating the risk pool.
If the Internal Revenue Service determines that the association is not tax-exempt, a portion of the risk pool's fund balances would have to be used to pay the pool's accumulated tax liability, which is estimated to be $4 million.
What benefit does the state derive from the existence of a risk pool?
While insurers and their policyholders must pay large amounts in assessments to operate the pool, the state and its taxpayers derive a benefit from the operation of the pool, as persons with pool insurance policies have a source of funds to pay for the care they require.
Policy Options for Legislative Action
In view of the impending repeal of the risk pool and the uncertainties of the regulatory environment, the Legislature has three clear options with respect to the coverage of the uninsured and otherwise medically uninsurable:
Recommendations for the Risk Pool
1. The risk pool should devise a marketing plan which will target its promotional efforts to the appropriate segment of the market. This plan should consist of a detailed survey of those presently insured to determine how they learned of the pool. The survey should also attempt to identify the form of media most likely to reach such persons.
Further, the pool should request the Department of Insurance to assist in collecting information about persons rejected by private companies. While the department may not be able to release such names to the pool, it could contact them on behalf of the pool and provide information about pool coverage and the means of contacting the pool about becoming a pool client.
2. Although the portion of pool expenses attributable to administration is declining, the pool association should study its administrative expenses to determine whether the pool could increase its efficiency. It should also reduce its legal expenditures after it has resolved its pursuit of tax-exempt status.
3. The pool should request that its actuary review the pool's funding. In doing so, the actuary should consider escrowing a certain amount of funds for tax liability (estimated to be $4 million), and then determine an appropriate monthly assessment based on projected levels of claims and growth. This study should also determine the appropriate size of a reserve fund for the pool.