The California HealthCare Foundation’s CaliforniaHealthline reports today on an about face by California’s Pre-Existing Condition Insurance Plan (PCIP) that could be a warning of things to come for other state high risk pools.
California’s PCIP was among the first state pools to open for business under a provision of the Patient Protection and Affordable Care Act (PPACA) that created interim high risk pools to provide temporary coverage at standard market rates until insurers and managed care plans must accept all applicants starting Jan. 1, 2014. The PPACA allocated $5 billion to subsidize the pools since by definition they are an adverse risk selection mechanism and aren’t likely to cover claims costs solely with insureds’ premium dollars.
After getting off to a slow start in 2010, federal and state officials grew concerned that too few people were signing up for coverage. So this summer, the Obama administration opened the tap wider on the $5 billion interim high risk pool subsidies, reducing premiums effective July 1 in two dozen states where the federal government runs the pools. California’s PCIP soon followed, reducing premiums by as much as 20 percent to attract more enrollments. The tactic worked, but perhaps too well. Previously believing there were too few enrollees, California’s Managed Risk Medical Insurance Board (MRMIB), which oversees the PCIP, is now apprehensive too many will come aboard and sink the ship.
CaliforniaHealthline’s David Gorn explains:
The threshold for the number of Californians who might participate in PCIP was estimated at about 23,000 people. Since a few more than 5,000 people signed up in that first year — and new enrollees came on board at a rate of roughly 500 a month — it seemed that the program was financially stable and able to take on more participants.
But after the first year, state officials got their first real claims data to test that estimate, and the amount required by recipients was much higher than expected. That 23,000-person threshold estimate was reduced to 6,800 Californians.
That means (given current enrollment of 5,290 including last month’s bump of 726 new subscribers), there’s now only room for a little more than 1,500 new enrollees (which is about two months’ worth of enrollees, given October’s bump of 726 new subscribers).
Unless the federal government pumps more money into the program.
In other words, more people are enrolling, but bringing with them high medical utilization costs that challenge the ability of the MRMIB to keep the PCIP solvent until 2014 when it will no longer be needed. Other states may soon experience a similar conundrum: fulfilling the PPACA’s mandate to have the interim high risk pools serve markets of last resort that must accept applicants without medical underwriting while having enough money to pay for their care. And manage to do so for nearly four years.
A little more than one year ago, this blog discussed how the interim risk pools could become a catastrophic coverage pool for those requiring very high cost care and threaten to rapidly draw down the $5 billion appropriated for them in the PPACA. This may well be happening now.
Premiums for employer-provided health insurance rose by 50 percent from 2003 to 2010 as employers passed on high costs to workers, boosting their annual share of premiums by 63 percent over the seven-year period, according to a report issued this week by The Commonwealth Fund. That’s much faster than overall inflation and wage growth during the period. The numbers reflect an affordability crisis confronting health insurers given the rate of growth of premiums is taxing the ability of employers and individuals to pay them at the same time the nation struggles to regain economic growth.
The report looks to a combination of insurance market reforms, payment incentives and delivery system changes to potentially reduce insurance costs by an average of 1 to 1.5 percentage points per year over the next decade. But even with the higher savings figure, coverage would remain costly, putting the average national family premium at $16,912 in 2015 and $20,620 by 2020, the report estimates.
While not specifically called out in The Commonwealth Fund report, the premium increase data underscore the enormous social cost of the poor health habits of many Americans — unhealthy diet and lack of adequate exercise and sleep — that underlie chronic conditions such as heart disease and diabetes that in turn drive up medical costs. Insurance market reforms alone can’t address those factors that according to the Preventative Medicine Research Institute account for 75 percent of health care costs that can be prevented by lifestyle changes.