(Reuters) – The Obama administration on Friday said it would stop enrolling new beneficiaries in a special $5 billion insurance program for people with pre-existing medical conditions, because of rising costs and limited funding.
The news comes a day after a top U.S. healthcare official told lawmakers on Capitol Hill that the administration is grappling with financial difficulties but determined to keep the Pre-Existing Condition Insurance Plan (PCIP) operating in 23 states and the District of Columbia through 2013.
The PCIP goes into run off mode as federal officials freeze new enrollments hoping to keep it solvent through the rest of the year until medical underwriting in the individual market ends January 1, 2014. In 2010, this blog noted the challenge of maintaining solvency of the PCIP, citing a paper by the National Institute for Health Care Reform. Notably, the Institute predicted the $5 billion the Patient Protection and Affordable Care Act allocated for the PCIP might only cover 200,000 people a year — just half of the number currently enrolled according to the Reuters item.
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.
Concerned with low enrollment in Pre-Existing Insurance Plans (PCIPs), the Obama administration is reducing premiums effective July 1 in two dozen states where the federal government runs PCIPs.
PCIPs were authorized by the Patient Protection and Affordable Care Act’s Interim High Risk Pool provision designed to temporarily cover individuals with pre-existing medical conditions until insurers and health plans must accept all applicants starting Jan. 1, 2014.
The remaining states that run their own PCIPs may also reduce rates, according to this Los Angeles Times story, which reports premiums could fall by as much as 40 percent based on more nuanced actuarial analysis.
While applicants will still have to demonstrate that they have been medically uninsured for at least six months, a requirement they provide evidence they have been denied coverage has been scrapped. Now a letter from a health care professional stating the applicant has a medical condition will suffice, according to The Times.
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.
The Washington Post is the latest news outlet in the past few months to report on low initial enrollments in state Pre-existing Condition Insurance Plans (PCIP) established earlier this year under the Patient Protection and Affordable Care Act (PPACA). During the fall, tepid interest in the PCIPs — referred to in the PPACA as the Interim High Risk Pool designed to provide coverage regardless of pre-existing medical conditions until health insurers must accept all applicants in 2014 — were also the subject of stories by the Associated Press and The New York Times.
The purpose of the PCIP is to help pare down the number of medically uninsured who can’t get coverage under current health insurance medical underwriting guidelines. The Post reports state PCIPs are proving to have narrow appeal, attracting those needing very costly care and raising the question of whether the $5 billion appropriated by the PPACA to subsidize PCIPs will be enough before 2014 despite low early enrollments.
What’s likely suppressing enrollments are provisions in the PPACA that require PCIP premiums be set at standard market rates based on age. For the oldest members of the pool, premiums are limited to four times those charged the youngest members of the pool. That means those most likely to be served by PCIPs — those with pre-existing conditions in their fifties and early sixties — are finding the premiums out of reach, just as are individuals in that age range who are healthy, acceptable risks for individual health plans and insurers.
As federal officials stress it’s too early to draw conclusions, it remains to be seen whether the PCIPs will make any appreciable reduction in the number of medically uninsured Americans. Early indications are not promising. They suggest PCIPs will serve a narrow demographic of very sick but relatively affluent people aged 50-65 who are too young to enroll in Medicare and who need coverage for costly conditions as a hedge against medical bankruptcy.
A month ago, the Associated Press reported state Pre-existing Condition Insurance Plans (PCIP) set up this year under the Patient Protection and Affordable Care Act’s (PPACA) are not attracting the flood of applicants some some feared would quickly deplete the $5 billion the PPACA for appropriated for them. The PPACA’s appropriation for the Interim High Risk Pool is to provide coverage for people in the individual health insurance market with pre-existing medical conditions who because of the conditions can’t get coverage in the standard market until insurers must accept all applicants starting Jan. 1, 2014.
The New York Times last week did its own story on the lackluster enrollments in the mostly state-run PCIPs. While sign ups may be slow for a variety of reasons — the bad economy probably chief among them — the PCIPs seem to show the biggest initial appeal to those who have costly conditions requiring expensive treatment such as the cancer patient profiled in the Times story.
If early trends continue, the PCIPs could end up becoming more of a catastrophic coverage pool for those requiring very high cost care, known as high severity losses in insurance terminology. Such high severity losses could threaten to rapidly draw down the $5 billion allocated for them in the PPACA just as easily as too many people turning to PCIPs to get individual health coverage.
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.”