The Interim High Risk Pool created by the enactment of the Patient Protection and Affordable Care Act’s (PPACA) one year ago has not changed the underlying dynamics of the individual health insurance market and consequently appears to be having a negligible impact on reducing the ranks of the medically insured.
The pool, formalized as the Pre-Existing Conditions Insurance Program (PCIP), was created to provide temporary coverage for those with pre-existing conditions who don’t meet minimum medical underwriting standards of insurers and managed care plans. It goes away on January 1, 2014, when the PPACA outlaws medical underwriting and requires payers to accept all applicants regardless of medical history.
So far, few have signed up for the plan. As prior to the PCIP, younger people who would be eligible for PCIP enrollment pay lower rates for coverage but tend to go without. Older folks in their 50s and early 60s who want coverage are finding PCIP rates out of reach. An added deterrent, other observers note, is the requirement that applicants for coverage be continually uninsured for at least six months.
“The PCIP is a great health plan and the out-of-pocket maximum is low,” Barry Cogdill, president of Business Choice Insurance Services in San Diego, told SignOn San Diego. Nevertheless, he added, PCIP premiums are too expensive for many. “That’s why health care reform happened,” Cogdill explained. “The individual market has been the Achilles’ heel of the health insurance market. You end up with a lot of uninsured people.”
It appears many in this circumstance who aren’t covered by group or government plans will remain so. Whether they will be able to find affordable coverage when state health benefit exchanges designed to aggregate purchasing power of individuals and small employers open for business in January 2014 remains to be seen.
Less than one week after Blue Shield of California said it would raise rates on individual market products May 1 because premium revenues were not keeping up with losses due to rising medical costs and increased utilization of high cost procedures, the insurer has cancelled the increase.
Losses are now ameliorating, Blue Shield spokesman Tom Epstein told the Los Angeles Times, coming in below projections for the latter part of 2010. While the insurer isn’t fully certain of the reason, it believes consumers are assuming more risk by purchasing higher deductible policies with fewer benefits in order to keep rising premiums affordable.
“It’s definitely happening,” Epstein told The Times. “As rates go up, people do tend to downgrade into less rich products that have more cost sharing.”
In canceling the planned May 1 rate increase that was to average 6.5 percent and boost premiums by as much as 18 percent for some policyholders, Blue Shield said March 16 that it still expects to lose money in 2011 after $27 million losses on individual policies last year.
Duke Helfand of the Los Angeles Times has yet another story in today’s issue on the enormous and unsustainable increases in California individual health insurance premiums. Helfand’s story spotlights recent rate hikes by Blue Shield of California, which according to his story have gone up 50 percent or more for about a quarter of 193,800 individual policyholders since last fall.
Blue Shield spokesman Tom Epstein defended the increases as reflecting soaring medical care costs and increased utilization of more costly services by policyholders as well as new state and federal mandates. Those cost drivers required Blue Shield’s actuaries to recalculate projected claims payouts.
Nevertheless, Epstein explained, the outgo continues to exceed premium revenue. Blue Shield expects to lose $20 million to $30 million on its individual policies this year after a loss of $27 million the previous year, he said.
“People are justifiably concerned when they get a significant rate increase. We wish that we didn’t have to do that,” Epstein told The Times. “When people are getting increases like that and we’re still losing money, something is seriously wrong.”
As Teal’C of Stargate SG-1 would say, “Indeed, O’Neill.”
If Blue Shield were a monoline carrier that sold only individual (and not group) health insurance, California Insurance Commissioner Dave Jones, piqued at Blue Shield’s rate hikes and seeking authority to allow him to approve rates before they go into effect, could have an even bigger problem on his hands: potential insolvency of the insurer.