Most South Dakotans have health insurance through private companies or through their employer.
About 670 of them buy their insurance from the state.
The insurance plan is called the South Dakota risk pool, and some state legislators and candidates for state office say it ought to serve more of the state’s residents.
The state created the risk pool in 2003 during a special legislative session to solve what legislators saw as a crisis, said Sen. Jason Gant, R-Sioux Falls. Gant is a Senate member of the risk pool’s governing board.
“Just like the federal government had to step in with this (Wall Street) bailout, South Dakota had to step in by creating this risk pool,” Gant said last week. “We were in a crisis.”
Because of a 1996 “guaranteed issue” law that required health insurance companies to cover a certain percentage of “uninsurable” individuals, companies were losing too much money paying claims to remain profitable. By 2003, there were only three left.
To bring back the companies back, the state stopped forcing them to accept uninsurables and started the risk pool to cover them itself.
The risk pool accepts S.D. residents if they lose insurance through no fault of their own, exhaust COBRA benefits and have had 12 months of prior coverage.
Enrollees pay 150 percent of the average premium. The coverage provides options to the most needy without driving away private companies, Gant said.
“By taking those individuals who were so sick and putting into that risk pool, it gave the opening for more insurance companies to come into here because the market was better,” he said. “They didn’t have to take some of those cases that were so sick and were going to cost so much money.”

Expansion suggested
Sen. Tom Dempster, R-Sioux Falls, believes opening the risk pool to more “uninsurable” residents could lure still more private companies to South Dakota to help drive down prices.
“For the rest of the insurable population, it increases the number of private insurers, which would increase competition,” Dempster said. “Many people who see the benefit of a competitive market recognize the benefits of a risk pool.”
Dempster was a member of the Zaniya Task Force, a group formed by the state in 2007 to study South Dakota’s health care needs. The task force identified 5,211 individuals as uninsurable, and the first of 16 recommendations in the final report is to expand the risk pool to them.
“We’ll continue to use the task force as a guide to the initiatives we want to take on in the legislature,” Dempster said.
No bills to extend risk pool coverage to those identified by the task force were introduced during the 2008 legislative session, but Gant and Dempster each believe it is only a matter of time before the issue bubbles up again.
The first step, Dempster said, would be to determine how to pay for such an expansion. Currently, the state contributes $600,000 each year. Insurance carriers contributed $862,311 for 2007, a figure based on a $.25 monthly fee paid for each person insured by that company in the state.
Physicians paid in $892,295 by accepting payments based on 135 percent of the Medicaid rate. Based on those rates, hospitals contributed about $1.2 million.
The federal government contributed $1.1 million. The variable federal grant is authorized annually by Congress
An expansion to the program would bring changes, Dempster said. The task force suggests a work group to define eligibility criteria and develop “funding mechanisms.”
“I would certainly be in favor of understanding exactly how expensive it would be,” Dempster said.

Combined Approach
Dave Hewett, the President of the South Dakota Association of Healthcare Organizations (SDAHO), said a risk pool expansion may not be necessary. Hewett is also a member of the risk pool’s governing board and served with Dempster on the Zaniya Task Force.
He believes the insurance market in the state may already be saturated.
“We have plenty of competition when it comes to insurers,” Hewett said.
As a representative of SDAHO, he said he feels that a combined approach may be best. The previous “guaranteed issue” rules may have been too strict, but Hewett said the definition of “uninsurable” is sometimes too broad.
At the end of FY08, for example, 18 of the 670 individuals in the pool were deemed “uninsurable” as a result of obesity. Thirty-five were “uninsurable” due to asthma.
“Even moderately-elevated blood pressure can disqualify you from an individual policy,” he said. “Ideally, what we would like to see is a program that requires individual insurers to step up and take on some of those individuals.”
The risk pool itself is a work in progress, he said. In 2006, the legislature voted to allow certain people whose insurance companies leave the state to join the risk pool. In 2007, 39 enrolled.
Hewett said the legislature will continue to tweak the program, even if such changes come in tandem with other attempts to cover the uninsurable population.
“This is not a static program,” he said. “It’s changing year-in and year-out.”