federal risk pool

Health insurance and high-risk pools

Federal pool and state-sponsored programs

March 31, 2014

UPDATE:  Read the latest information about transitioning to the exchanges from a PCIP or pre-ACA state-run high risk pool.

HHS announced in March that PCIP insureds could keep their coverage until April 30 if they have not yet enrolled in an exchange plan. (Total PCIP enrollment had dropped to around 30,000 people by January 2014, down from about 85,000 three months earlier. The majority of PCIP insureds had already transitioned to a new plan).

This extension helped to guarantee that insureds will not have a gap in coverage, even if they had faced obstacles in obtaining new coverage.  Healthcare.gov and most of the state-run exchange websites were operating very well as of January, so PCIP enrollees should have had little difficulty in getting a policy before their existing coverage ended.

One of the goals of the Affordable Care Act was to make health insurance available to nearly all Americans, including those with pre-existing conditions. Although group health insurance is guaranteed issue for eligible employees, people who purchase their own health insurance have to go through a medical underwriting process that has historically resulted in roughly 20 percent of individual applications being denied.

The ACA was signed into law in March of 2010, and at that point, the requirement – starting January 2014 – that all policies be guaranteed issue was still nearly four years in the future.

Bridging the gap

To bridge the gap between 2010 and 2014 for people with pre-existing conditions, the ACA created temporary Pre-Existing Condition Insurance Plans (PCIP), initially run by state governments in 27 states and by the federal government in 23 states and the District of Columbia. As of July 2013, 17 states that had been operating their own PCIP had turned their plans over to the federal government. (See who currently runs your state’s PCIP). And although new-member enrollment ceased in early 2013, the PCIPs continue to provide health insurance coverage for people who are still enrolled.

The PCIP program was well-intentioned but struggled financially from the outset, with lower enrollment and higher costs than originally projected. In order to help keep the program afloat as long as possible, HHS made some changes along the way.

In 2011, eligibility requirements were eased in order to increase enrollment. Premiums were also lowered by up to 40 percent in 18 states where the PCIP is administered by the federal government, to bring the premiums closer to the rates in each state’s individual health insurance market.

In the face of higher-than-expected costs, however, the government increased enrollees’ maximum out-of-pocket annual expenses for 2013 from $4,000 to $6,250. The rate increase took effect January 1, and applies to plans administered by the federal government, which impacts enrollees in 40 states and the District of Columbia.

Risk pools by the numbers

Roughly 135,000 people have enrolled in PCIP plans nationwide since they opened in 2010. To qualify, people had to have been without health insurance for at least six months and must have a pre-existing health condition or have been denied coverage as a result of a health condition. PCIPs were initially established to function as a bridge to 2014 when people will no longer be denied insurance coverage or charged more for a health plan because they have a pre-existing health condition.

The PCIP program’s high cost has been attributed in part to the fact that the population served is disproportionately older. More than seven in 10 people enrolled are age 45 and above.

Nearly four in ten claims paid in 2012 were for one of four diagnoses: cancers, ischemic heart disease, degenerative bone diseases, and the follow-up medical care required after major surgery or cancer treatments. In 2012, the average cost per person was $32,108. However, just 4.4 percent of enrollees averaged costs of $225,000 accounting for more than half of all claims paid.

PCIP changes

In addition to raising out-of-pocket expenses for enrollees, the government has taken additional steps to reduce the PCIP program’s cost.

In August 2012, the federally administered plans changed provider networks and in the process reduced reimbursement rates. They also lowered the rate of pay to hospitals treating large numbers of the program’s enrollees.

Three benefit plan options were consolidated into one, and pharmacy benefits have been changed; enrollees are now required to refill prescriptions for chronic illnesses by mail order after the second refill, and only pharmacies that have proven to be more cost-effective will be allowed to dispense specialty drugs.

How will people in the PCIP transfer to a private plan?

Coverage will be available through the risk pools until 2014, when consumers will have access to health coverage through insurance exchanges established by the health reform legislation.

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