Monday, August 2, 2010

Interim Final Rule Addresses Eligibility, Premiums For Temporary High-Risk Program

On July 1, the Pre-Existing Condition Insurance Plan (PCIP) program, created under the Patient Protection and Affordable Care Act, went into effect. In the July 30 Federal Register, the Department of Health and Human Service's (HHS) Office of Consumer Information and Insurance Oversight (OCIIO) issued an interim final rule that addresses eligibility qualifications for participating in the program and the premiums that are allowed to be charged.

The Affordable Care Act requires the HHS to establish, either directly or through contracts with states or nonprofit entities, a temporary high risk health insurance pool program to provide affordable health insurance coverage to uninsured individuals with preexisting conditions. The HHS is directly running a PCIP in 21 states, while 29 states have decided to run their own PCIP. This program will continue until Jan. 1, 2014, when Health Insurance Exchanges will be available for these individuals to obtain health insurance coverage.

Eligibility. The interim final rule specifies that an individual eligible to enroll in a PCIP must be a citizen or lawfully present in the U.S., have not had creditable coverage during the six-month period prior to applying for coverage through the PCIP, and have a preexisting condition. An individual must prove that he or she has a preexisting condition. The interim rule states that a PCIP may determine that an individual has a preexisting condition if they satisfy any one of the following criteria:

1. the individual provides documented evidence that an insurer has refused, or has provided clear indication that it would refuse, to issue individual coverage on grounds related to the individual's health;

2. the individual provides documented evidence that he or she has been offered individual coverage but only with a rider that excludes coverage of benefits associated with a pre-existing condition; or

3. the individual provides documented evidence that he or she has a medical or health condition specified by the state and approved by the HHS.

Premiums. The interim final rule requires that premium rates for PCIPs must be at "a standard rate for the standard population." This refers to the premium rates offered in the individual market in the state where the PCIP operates. The OCIIO noted that existing state high risk pools' premiums typically average between 105% to 250% of the standard rate of the individual market. However, the Affordable Care Act requires that premiums in the PCIP program be at the standard rate, rather than at a higher proportion of that rate. In essence, PCIPs are not allowed to charge enrollees premiums at a rate that exceeds 100% of the standard individual market rate in the PCIP service area.

The OCIIO noted that the interim final rule does not mandate a specific formula for calculating this standard rate. Instead, a PCIP is allowed to calculate the standard rate using reasonable actuarial techniques.

The interim final rule is effective on July 30. Comments on the interim rules, which must be received by September 28, may be submitted through the federal eRulemaking Portal at Comments should be identified by OCIIO-995-IFC.

For more information, contact Ariel Novick at (301) 492-4290.

For a comprehensive analysis of the Patient Protection and Affordable Care Act, and additional information on health reform and other developments in employee benefits, just click here.


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