When Diane Derichs's husband was retiring from his assembly-line job making fruit bars for ConAgra Foods, the couple invited over an insurance agent to help her find a health plan.
A part-time hairdresser, Derichs, at 58, was too young for the Medicare that her husband, Vernold, could already get. Sitting at their kitchen table in a St. Paul suburb, Derichs told the agent about the back surgery she had once needed for her scoliosis, the bad tendons in her feet, the lupus that causes painful sores on her skin.
Blue Cross Blue Shield, the agent discovered, wouldn't accept her. Nor would Mutual of Omaha. Or any other company he checked. "It's like, whammo, don't get sick," Derichs said. "As soon as I said 'lupus,' it was just like: 'Red flag. Sorry, can't do anything.'"
And so, on the agent's advice, she signed up for the Minnesota Comprehensive Health Association, a last-ditch chance at coverage that the state offers to those the insurance industry does not want.
How well this nonprofit corporation -- and similar ones set up by nearly three dozen other states -- can serve insurance castaways such as Derichs is a test of Sen. John McCain's road map for the nation's health-care system. High-risk pools, as such arrangements are known, are a linchpin of the Republican presidential nominee's thinking about how to make health insurance more plentiful and less expensive.
If McCain is elected president next week, he has said, he would work to remove the tax preference for company health benefits and offer Americans tax credits to put toward any health plan they choose. He wants to let people buy health plans from insurance companies anywhere in the country, preempting state regulations that spell out whom insurance carriers must cover and what kinds of benefits they must provide.
McCain acknowledges that such a free-market climate would inevitably freeze out some people with serious medical problems who are looking for insurance on their own. So he is calling for a guaranteed access plan, a federal effort to share the cost of high-risk pools and dramatically expand their reach -- from fewer than 200,000 Americans in state plans today to perhaps 5 million.
A philosophical difference between the presidential candidates over health insurance comes down to this: Given that relatively few people have extremely expensive medical problems, is it better to require insurance companies to include them with everyone else, as Democrat Barack Obama favors, or to separate them, as McCain prefers, in insurance pools just for them?
Among the high-risk pools in 34 states, Minnesota's is the oldest, largest and, many believe, the most successful. "It just seems to work," said Doug Holtz-Eakin, senior policy adviser to McCain.
Created in a wave of health-care changes here in the late 1970s, the Minnesota Comprehensive Health Association (MCHA) had a membership of 28,000 last year, equaling nearly 7 percent of the state's uninsured population. Small as that share was, it far exceeded any other state's, according to the National Association of State Comprehensive Insurance Plans.
The price of belonging to MCHA is lower than in most states, set one-fifth above the cost of the average individual insurance policy in Minnesota. Like all such programs, MCHA requires a waiting period for new members before it will pay for treatment of medical problems they already had -- but the six-month wait here excludes drugs and is shorter than in some places.
Its finances are strained and getting worse, but less so than in other states. California's high-risk pool is so strapped that it put a limit on enrollment this year and lowered the maximum it would spend on anyone's treatment. Tennessee's pool has had to eliminate low-income subsidies for new members. Florida's pool has not let in anyone since 1991.
The Maryland Health Insurance Plan, the only high-risk pool in the Washington area, has been growing so fast that it needed to raise the fees on hospitals that help pay for the program and require new members to wait longer for coverage of existing illnesses -- or pay extra for it.
Here in Minneapolis, Lynn R. Gruber, MCHA's president, said: "We treat them like gold. It's all we do, focus on these chronically ill members, what their needs are." Members get discounts on specialty drugs. Those who are particularly sick get letters or phone calls coaching them on how best to manage their ailments.
Members must be rejected by at least one insurance company to join. Some come and go from the program, but many find it a long-term insurance haven.
Betty Clark joined 22 years ago when she left a corporate job to start her own business auditing insurance carriers for businesses. She was in her late 30s with no major health problems and was startled to be rejected for coverage because she weighed 190 pounds.
Clark, now 59, pays nearly $500 a month in premiums. MCHA has covered a hysterectomy, spine surgery, two stents in her heart and diabetes treatment. "Without MCHA, I never would have my company," she said.
Still, even MCHA's most ardent supporters believe a risk pool is not the best solution for those who are hard to insure. "It is not a panacea. . . . We need to be moving in the direction of universal coverage," said Gruber, who has run MCHA for 18 years. "No one should be rejected because of their health conditions. Our federal government has failed us . . . if we are still here in five or 10 years."
Kristin Flaten, one of two consumer representatives on the board of directors, said: "The most vocal people in MCHA are mad about being in MCHA. They don't like being told they are high risk. They don't like paying the extra money. There is a perceived unfairness they are being treated like that, and the insurance companies are getting away with it."
No one in Minnesota can say for certain how many people who need MCHA stay away because of the price or the waiting period. But the American Cancer Society says that only a tiny fraction of the more than 100 Minnesotans it has referred to the program because they were rejected by insurance companies ever signed up, according to Stephen Finan, the society's associate director of policy.
As another sign of the financial burden, an increasing number of MCHA's members lately have been choosing to pay more out of their pockets -- deductibles as high as $10,000 -- in order to have less expensive monthly premiums.
Some cannot afford MCHA at all. LaVonne Kees, 59, a widow in the suburb of St. Louis Park, was diagnosed with Stage IV colon cancer in August 2007. She was still getting chemotherapy when she was laid off in June from her job as a distribution clerk for a hospital supply company.
Along with her job, she lost the United HealthCare plan that had cost her $22.50 a month. She went on COBRA, a federal arrangement that lets displaced workers temporarily keep group health benefits, but she lost that coverage in a dispute over when her second premium was due. Her small retirement account made her not quite poor enough for Medicaid, so she called MCHA.
The woman on the phone told her it would cost $500 to $600 a month. "I thought, 'Oh, really?' " Kees said. Living on $900 unemployment checks, with rent and car payments, "there is no way I could pay that." After her last chemotherapy treatment, she got a $26,000 bill. She canceled scans in September that would have determined whether she needed more chemotherapy. She canceled an appointment with her oncologist. "As of right now," she said, "everything is kind of at a standstill."
High as they are, members' premiums cover only half of MCHA's costs. The leftover losses -- absorbed by fees on some insurance companies -- have been growing fast. They more than doubled in six years, to $120 million in 2007, and are rising this year more quickly than expected, with recent estimates close to $150 million.
"I don't know how you run a thing with a $120, $130 million loss a year. It seems to be getting a bit large," said MCHA's board chairwoman, Kathy Mock, who is also vice president for public affairs at Blue Cross Blue Shield of Minnesota.
As the program is getting more expensive, fewer insurers are helping to pay for it because of a federal legal quirk that exempts self-insured companies. As a result, the losses are being spread among a shrinking group of commercial insurance carriers. Gruber called it ironic that the Minnesota government in 2005 became self-insured for state workers, so even it no longer chips in.
McCain has said that, under his guaranteed access plan, the federal government would cover half the cost of such pools, with the rest paid by states and the insurance industry. In the spring, Holtz-Eakin estimated that the federal share might be $7 billion or $8 billion a year. "It's going to be twice that, realistically," he said in a recent interview.
Minnesota has been getting a small amount of federal help lately, through grants Congress approved to subsidize people with low incomes. The money, though, has been unpredictable. MCHA recently decided to let people with slightly higher incomes qualify for that help, only to discover that its grant this year was less than the last one. That means each eligible person will get a smaller check.
In such an environment, members such as Derichs are grateful for the coverage but resentful of its price. MCHA has helped Derichs pay for a hernia repair this spring and the expensive drugs she takes for lupus. She is scheduled for a second foot surgery next month.
Yet her monthly premium has gone from $389 when she joined two years ago, to $439 when she turned 60 last winter, to $506 with a rate increase in June. "Oh, man, it's almost too much," Derichs said.
"I guess the thing that kind of saddens me is, we were people who did put money aside for retirement. We weren't planning to go to Hawaii or Florida for six months -- just a comfortable retirement," Derichs said. Paying for MCHA "is a real struggle. It's almost to the point people say, to hell with it. . . . But our priorities at this point are, yes, we need health insurance, because we have health situations. Right now, we can't take that chance."