Health Insurance Report™ helps you track and analyze legal, legislative, and regulatory developments affecting the health-insurance industry throughout implementation of the Affordable Care Act...
By Sara Hansard
Republican leaders of the House Energy and Commerce Subcommittee on Health April 3 called for increased funding for a program created by the health care reform law in which people with health problems can get insured.
“One area that both sides have designated as a top priority is coverage for those who have pre-existing conditions,” subcommittee Chairman Joseph R. Pitts (R-Pa.) said at a hearing on Protecting America's Sick and Chronically Ill.
Pitts said that Republicans argued during debate over the Affordable Care Act that the $5 billion the law provides for the Pre-Existing Condition Insurance Plan (PCIP) program was too low. A Republican alterative to ACA proposed $25 billion over 10 years to help people with pre-existing conditions through new programs that reformed and expanded high-risk pools in 35 states and reinsurance programs, Pitts said.
PCIP, under which people who have been uninsured for at least six months because of pre-existing conditions can buy coverage at standard market premiums, suspended new enrollment Feb. 15 because costs to cover the very sick people in the plans were higher than expected (see previous article). PCIP, which started operating in 2010, is to end in 2014, when ACA market reforms guaranteeing people with medical problems access to health insurance without charging more than for healthy people and federal subsidies will be available to help moderate- and low-income people buy coverage.
House Republican leaders sent a letter to President Obama March 5, asking him to transfer funds from other ACA programs to fund PCIP (see previous article).
“What will happen to those people who had pending applications for PCIP when [the Centers for Medicare & Medicaid Services] cut off new enrollment?” Pitts asked. An estimated 40,000 people would have enrolled during the remainder of 2013, he said.
PCIP was “arguably duplicative” of high-risk pools that covered more than 200,000 people in 35 states before ACA was enacted in 2010, said Rep. Michael C. Burgess (R-Texas). In some of those states, the federal PCIP was merged with state high-risk pools, and in others, PCIP operates parallel to the state programs, he said.
The federal PCIP enrolled about 100,000 individuals, “well short of the 375,000 that CMS estimated,” Burgess said. Current state programs are underfunded, he said, adding that during ACA negotiations he was “prepared to offer $30 billion” to fund an improved program to cover people with medical problems. “It's a lot cheaper than the $2.6 trillion that [ACA] is going to cost, and we wouldn't have had to blow up the whole system in order to take care of those people that arguably are going to need help,” he said.
Ohio Lt. Gov. Mary Taylor (R), who is director of the state's Department of Insurance, testified that “the federal government's poor management and oversight of the program led to its unsustainability.”
The Ohio Department of Insurance had general regulatory authority over the ACA PCIP program in the state, which was among the most cost-effective in the country, Taylor said. However, “the federal management of the high-risk pool program quickly caused disagreements between the two agencies,” she said.
In 2011, the Department of Health and Human Services refused to approve rates that had been approved by the Ohio Insurance Department for the two plans in the program. HHS directed the Ohio high-risk pool administrator “to artificially reduce rates for those in the lower-deductible plan and artificially increase rates for those in the higher-deductible plan,” Taylor said.
Regulators must ensure “that each block of business is solvent and that one pool of individuals isn't subsidizing the costs of another pool of individuals,” Taylor said. “Forcing a company to artificially set rates causes serious solvency concerns and potentially puts the company at risk where it can't pay the health claims incurred by those individuals and families who have insurance coverage under the plan.”
Eventually HHS and the Ohio department agreed on rates, but it caused consumer confusion and pushed back renewal dates, she said.
According to Taylor, despite the state agency deeming certain Ohioans eligible for the program, HHS said they were not and forced them out. This caused those residents to lose their only available source of coverage, she said. After a lawsuit was filed, an agreement was reached in which the state department's authority was upheld, Taylor said. “This several-month-long ordeal demonstrated the federal government's propensity to overreach and disregard state regulation of insurance that resulted in harm to consumers in the process.”
Sara Collins, vice president, affordable health insurance, at the Commonwealth Fund, a New York-based foundation that advocates for health care reform and has been supportive of ACA, defended PCIP. “The program has succeeded in providing transitional support for thousands of people who were uninsurable in the individual market,” she said.
PCIP, which operates throughout the country, provides more affordable coverage than people could get in most existing state high-risk pools, Collins testified. In addition, unlike most state high-risk pools, PCIP offered immediate coverage of pre-existing conditions, she said.
“But the program's limitations were expected from the outset, and demonstrate why high-risk pools in general are an inadequate substitute for the comprehensive insurance market reforms and expanded health insurance options to go into effect under the Affordable Care Act next January,” Collins said.
PCIP's low enrollment compared with the millions of uninsured Americans with serious chronic health problems is due to its lack of premium subsidies, Collins said. Medical claims relative to premiums--the medical loss ratio (MLR)--in both state high-risk pools and PCIP exceed 100 percent, Collins said, but the PCIP MLRs are as much as seven times that of high-risk pools in some states.
“The experiences of both the PCIP program and the state high-risk pools demonstrate the profound inefficiency of segmenting insurance risk pools,” she said. “Without the benefit of a broad and diverse group of insured people, both programs operate at a considerable loss and depend on federal and state financing to fund the enormous gap between premiums and claims costs.”
“The Affordable Care Act creates systemic change starting Jan. 1 that is truly responsive to the needs of those people who have pre-existing conditions,” Ron Pollack, executive director of Families USA, testified. Families USA supports ACA.
“While we support changes that would enable those people who right now during this transition period cannot get into the PCIP program, that should not be done by undermining the more permanent changes that should be made and will be made under the Affordable Care Act,” Pollack said.
“The PCIP program managed to solve less of the problem--enrolling fewer Americans than traditional state high-risk pools had enrolled--but at a higher per-person cost while still running out of money,” testified Thomas Miller, a resident fellow with the American Enterprise Institute (AEI), which has been critical of ACA. “At the same time, it discouraged continuation beyond 2013 of better, tested, state alternative mechanisms, the better-funded high-risk pools,” he said.
Miller warned that if ACA exchanges that open for enrollment Oct. 1 are plagued by premium spikes; implementation problems; limited enrollment; and adverse selection in which a disproportionately large share of unhealthy people enroll, the online markets “may end up more closely resembling somewhat larger versions of state-level PCIPs than more competitive alternatives to the current private insurance market,” he said.
Among other things, Miller suggested raising unsubsidized premiums for most enrollees in high-risk pools to at least 150 percent of standard rates and providing subsidies to lower-income people, as well as keeping as many of the older state high-risk pools as possible in operation after 2013 “as an insurance policy against major problems in exchange implementation and individual mandate enforcement.”
By Sara Hansard
Information on the April 3 hearing is at http://energycommerce.house.gov/hearing/protecting-america%E2%80%99s-sick-and-chronically-ill.
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