Small Business Risk Pools for Health Care

A Home Business Article Contributed by Sharon Hill

Risk Pools - a Small Business Health Care Alternative

High-risk small business health care insurance plans, called risk pools, created in 1976, have become an important safety net for small business owners who can't afford traditional employee health care and individual employees who may be denied traditional health insurance coverage due to a medical condition. Thirty U.S. states now provide risk pool health care coverage for nearly 300, 000 small business employees.

What is Risk Pool Small Business Health Care?

A small business health care risk pool is a state-created, nonprofit association that does not require tax dollars to operate, at least in most U.S. states. The risk pools are meant to be a temporary stopping point for start-up small businesses with little up front money and their employees who have been denied health insurance for medical reasons. Risk pools often help small businesses and their employees fill a gap in insurance coverage.

All individual employees applying for plan coverage as a small business employee must be residents of the state in which they apply. Besides proof of residency (typically one year in the state), employees being considered for risk pool coverage must provide either proof of rejection, or proof of current coverage with a premium in excess of what would be required under the risk pool coverage.

Proof of rejection simply means that the individual employee has to show that she or he has been reject for similar health insurance coverage by at least one insurance firm.

A third eligiblity, though less common, is referred to as "presently insured with a rider or rated policy." An individual employee need only prove that her or his current insurance coverage is rated, or includes an attached rider which excludes coverage for pre-existing conditions.

Ineligibility for Risk Pool Small Business Health Care

An individual employee is no longer eligible for plan coverage if he or she is no longer a resident of the state, although some states offer reciprocity. These reciprocity agreements state that if an individual has been enrolled under a similar state plan, has met the pre-existing waiting period and has not exceeded the lifetime maximum, she or he will be eligible for application to another state's risk pool upon fulfilling the residency requirement.

While several U.S. states have adopted risk pools for Medicare recipients, most states still do not accept an employee into the state's risk pool plan if the employee is a Medicare or Medicaid recipient. Many states have also adopted an enrollment cap on their risk-pool insurance plans. Under this enrollment cap, the state plan accepts only a stated number of individuals into the plan at any one time. Once filled, subsequent applicants must be placed on a waiting list.

An individual loses eligibility for the risk-pool plan in two ways: first,

if she or he has terminated coverage in the risk-pool at a time prior to 132 months before this application. Nor is an individual employee eligible for plan coverage if he or she has reached the maximum benefit level authorized by the plan.