Premiums Reduced, Eligibility Eased For Pre-Existing Conditions Program

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...

Premiums will be reduced and eligibility standards eased to help people with a pre-existing medical condition enroll in a federal program designed to help those who are unable to get affordable insurance because of such conditions, the Department of Health and Human Services announced May 31.

The changes, which take effect July 1, will affect 23 states and the District of Columbia, where the Pre-Existing Condition Insurance Plan (PCIP) program is operated by the federal government, HHS said in a release. For the rest of the states, HHS said it sent letters to inform them of the opportunity to modify their current PCIP premiums.

The program was set up under the Patient Protection and Affordable Care Act (PPACA). Under the changes announced May 31, premiums will drop 40 percent in six states and from 2 percent to 38 percent in 12 states, in order to bring them to the level of rates for healthy people in the individual insurance market, as required under PPACA, HHS said.

In the six states where PCIP premiums were already well-aligned with State premiums, the premiums will remain the same, HHS said.

In addition, the eligibility standards will be eased in 23 states and the District of Columbia.

“The plans are already offering coverage to many Americans who had nowhere else to turn, HHS Secretary Kathleen Sebelius said in a telephone press conference. She cited as an example a man in Texas who was able to get coverage through PCIP after he was diagnosed with a brain tumor. The changes we've announced today will help us get protection to many more.”

Although premiums vary by state, Sebelius cited as an example Virginia, where consumers will save almost $1,200 a year due to the premium reductions.

Insurance Denials Not Necessary

People applying for coverage will no longer have to wait for an insurance company to deny coverage before they can enroll, as is required now, Sebelius said. Under the new eligibility standards, applicants will need only to provide a letter dated within the past 12 months from a doctor, physician assistant, or nurse practitioner stating that they have or had a medical condition, disability, or illness, she said.

HHS also sent out letters to the 27 states that operate their own PCIP programs, providing options for modifying benefit packages or reducing premiums.

HHS is "ramping up" its outreach efforts on the PCIP program by working with states, health care providers, brokers, and advocacy organizations to reach more eligible people, Sebelius said. In addition, some insurers are notifying people about the PCIP program when they deny applications due to pre-existing conditions, she said. Beginning in fall 2011, HHS will begin paying agents and brokers for successfully connecting eligible people with the PCIP program, the agency said.

PCIP was created to provide coverage until 2014 to those who are unable to buy coverage or who are unable to afford health insurance due to pre-existing medical conditions. The PCIP program is funded with $5 billion under PPACA.

In 2014, PPACA will prohibit insurers from denying coverage or charging more to people with pre-existing conditions, and all states will open health insurance exchanges, where individuals and small businesses can purchase coverage. PPACA prohibited insurers from denying coverage to children based on pre-existing conditions as of 2010.

PCIP Coverage Like Federal Program

PCIP will give enrollees access to the same high-quality coverage that 9 million federal employees, retirees, and dependents have through the Federal Employees Health Benefits Program, said John Berry, director of the Office of Personnel Management, who spoke at the telephone press conference. OPM administers the PCIP program with HHS in the District of Columbia and the 23 states that have the federal government-run program.

"The PCIP enrollees have access to the exact same doctors and hospitals as federal employees do," Berry said.

Changes to the PCIP plan "are critically important for all people with chronic diseases," including arthritis, said John Klippel, president and chief executive officer of the Arthritis Foundation, who spoke at the press conference.

Rheumatoid arthritis affects 1.4 million Americans who need expensive care, Klippel said. Many people with the disease struggle to get access to doctors and medications they need, and many have been denied insurance, he said. "No one should be denied the ability to access a health plan that will help them get the care they need and deserve," he said.

States Urged to Review Requirements

HHS encouraged the 27 states that operate their own PCIP programs to review their plans to ensure that premiums match what is being charged in the individual insurance market, Richard Popper, director of the Office of Insurance Programs at the Center for Consumer Information and Insurance Oversight, said at the telephone press conference. CCIIO, part of HHS's Centers for Medicare & Medicaid Services, is in charge of private insurance regulation.

Reductions could be made in copayments, cost-sharing requirements, and deductibles, and the states that operate their own PCIP programs could adjust eligibility rules to add qualifying health conditions, Popper said.

The federal government is covering the cost of subsidizing the program in all states, Popper said. No cost estimate was available on how much the changes would cost the federal government, he said.

"We know we have room to take in more subscribers," Popper said. "We're making these adjustments to the premiums to make the plan more affordable, so that we can get more and more folks to continue enrolling in the program so they can get comprehensive health insurance coverage," he said.

Under PPACA, people must be uninsured due to medical problems for at least six months to enroll in PCIP. The program is separate from high-risk health insurance pools that have been in operation in many states since before PPACA was enacted.

Unlike PCIP, state high-risk pools typically charge 125 percent to 200 percent of the standard rate in the individual commercial market (see previous article).

Nevertheless, PCIP enrollment has lagged, with about 18,000 currently participating. That is well below the original estimate of 375,000 that CMS predicted would be covered by the end of 2010.

Republican Criticism of PCIP

Republicans on Capitol Hill have criticized PCIP, claiming that spending under the program has been inefficient and wasteful (see previous article).

"Since the high risk pools were implemented, the committee has expressed concern about its structural flaws, ineffective enrollment, low participation, and high cost," House Energy and Commerce Committee spokesman Debbee Keller told BNA in an e-mail. Keller works for committee Chairman Fred Upton (R-Mich.).

"HHS has now announced plans to reduce premiums, but they've yet to detail how they plan to pay for the reduced rate," Keller wrote. "It seems a fairly safe assumption that today's announcement is an effort to jump-start a program that has not come close to meeting expectations," she wrote.

She added that more information is needed, however, to determine the impact of the change for taxpayers and for people with pre-existing conditions.

NAHU Applauds Inclusion of Agents, Brokers

In a release issued June 1, Janet Trautwein, chief executive officer of the National Association of Health Underwriters in Arlington, Va., applauded HHS's changes to the PCIP program. NAHU represents about 100,000 health insurance agents and brokers who provide insurance to millions of Americans.

"NAHU is thrilled that HHS will soon lower health insurance premiums, loosen eligibility requirements, and begin paying agents and brokers for successfully connecting eligible individuals with the new PCIP program," Trautwein said in the statement.

"We applaud HHS for recognizing that agents play an important role in assisting consumers in making health insurance choices," Trautwein said. "This underscores our arguments and concerns regarding other provisions of PPACA—most notably the [medical loss ratio] provisions—that are having a deleterious impact on the ability of brokers to continue to serve consumers."”

The states that operate their PCIP program rely on agents and brokers to identify potential enrollees, certify that they are unable to get insurance in the private market, and assist them in obtaining appropriate PCIP coverage, Trautwein said. Agents and brokers are well suited to help HHS expand outreach to uninsured people, she said.

Health insurance agents and brokers have called for legislation that would exclude their commissions from the medical loss ratio, which limits administrative expenses for insurers and has led to lower payments to agents and brokers. Some Democrats who championed the medical loss ratio oppose that, saying it would raise the cost of policies to consumers (see previous article).

By Sara Hansard

Information on changes to the Pre-Existing Condition Insurance Plan program is available at