Robert Pear writes in today’s New York Times about state health benefit exchanges, a central component of the federal Patient Protection and Affordable Care Act (PPACA). Featured in Pear’s article are two state insurance exchanges, the Massachusetts Connector and the Utah Health Exchange. These two states’ exchanges are up and running well ahead of the Jan. 1, 2013 deadline that states must report to the federal Health and Human Services Agency on their progress establishing the exchanges. The exchanges are to be operational nationwide by Jan. 1, 2014 under the PPACA.
Pear notes “Congress assumed that insurance would also be sold outside the exchange. But federal subsidies, to help pay for insurance, will be available only to people who enroll in health plans through an exchange.”
Going forward, it will be interesting to watch the market dynamics play out between exchange markets and non-exchange markets. In setting up the exchanges, the PPACA effectively creates a subset of the larger insurance market in the hope that the government-instituted and subsidized subset will gain sufficient purchasing power to obtain coverage on terms and conditions favorable to insureds. If the exchanges do so with great success, they would control so much of the market that extra-exchange plans would effectively be crowded out of the marketplace. Particularly if employers opt to pay the $2,000 per employee fine for not providing health coverage to their workers, letting them get individual coverage through the exchanges as Tennessee Gov. Philip Bredensen discusses in a Wall Street Journal op-ed piece last week.
On the other hand, payors might chafe at conditions attached to offering coverage through the exchanges and ramp up their non-exchange plans aimed primarily at healthier people in order to hold down their medical loss ratios. If that trend accelerates, it could doom the exchanges to adverse selection by leaving them less healthy people the insurers and health plans want to avoid, creating even stronger incentive for payors to shun the exchanges and continue business as usual. Finally, if medical treatment costs continue to rise at their current clip, premium rates for all plans will grow increasingly out of reach — even for those subsidized through the exchange.
The Associated Press (via Yahoo! News) reports the Patient Protection and Affordable Care Act’s (PPACA) Interim High Risk Pool designed to cover people in the individual health insurance market with pre-existing medical conditions isn’t getting much interest. In several large states including California, there have been less than 500 applicants for Pre-Existing Condition Insurance Plans (PCIP) since coverage became available around July 1. Under the PPACA, the coverage is intended to serve as a stopgap until insurers and health plans must accept all applicants starting Jan. 1, 2014.
Sabrina Corlette, a Georgetown University research professor, told the AP the premiums are being set too high with the exception of Pennsylvania. That state charges a flat $283.20 (plus additional co-pays and coinsurance) monthly premium for its PA Fair Care PCIP regardless of the age of the applicant. Keystone State officials opted to use this form of rating — known as community-based rating contemplated under U.S. Health and Human Service Department regulations governing PCIPs — versus age-based rating employed by most other state PCIPs. “While other states have reported their high-risk plan applications are trickling in, Pennsylvania’s response to PA Fair Care has been brisk,” the Pennsylvania Department of Insurance announced in a September 30 news release. The news release notes the program is initially capped at 3,500 enrollees with enrollment on a first-come, first-served basis.
Since premiums in the individual market for those without pre-existing conditions have gone up around 20 percent this year, it’s not surprising that age-based rates in state PCIPs for those who do have pre-existing medical conditions are substantially higher than Pennsylvania’s. “I think there’s some sticker shock going on,” Corlette told the AP.
Likely heightening that shock is people’s constrained finances in the current troubled economy. Other observers blame tepid initial enrollments in state PCIPs on the PPACA’s requirement high risk pool applicants be medically uninsured for at least six months. That’s more likely to describe people in their 20s and 30s who tend to have fewer pre-existing conditions than the middle-aged. Self-employed individuals in their 40s and 50s with pre-existing medical conditions aren’t as likely to go bare for such a long period and are more inclined to seek coverage than so-called “young invincibles.”