PCIP costs, participation, are higher than experts anticipated

The CCIIO has issued a report detailing participation rates in the Pre-existing Condition Insurance Plan (PCIP) program to date. Participation rates and costs are, apparently, higher than the CCIIO and state-based PCIP actuaries anticipated they would be back in November 2010. PCIP provides private insurance to those locked out of the insurance market because of a pre-existing condition. The PCIP program serves as a bridge until 2014, when, under the ACA, insurance companies can no longer deny or limit coverage or charge higher premiums because of a pre-existing condition. Twenty-seven states operate their own PCIP program, often in coordination with their high risk pools, and 23 states and the District of Columbia have chosen to have federally-operated programs.

The CCIIO reports that it was estimated by state-based PCIP actuaries in November 2010 that per-member PCIP costs for calendar year 2012 would be $13,026, just slightly higher than estimated costs for state high risk pools. However, based on more recent figures, their estimates in August 2011 for calendar year 2012 reached $28,994. There are, according to the CCIIO, two likely reasons for this.

First, PCIP coverage differs from state high risk pool coverage in that PCIPs do not have the state high risk pool pre-existing condition exclusion periods, which range anywhere from three to 12 months for new enrollees who lack prior coverage. PCIPs have no waiting period, so high cost conditions are covered starting on the first day PCIP coverage begins. By contrast, people in state high risk pools often pay monthly premiums during their exclusion periods, before their coverage begins.

Second, a PCIP enrollee is more likely, says the CCIIO, to have an immediate need for care, compared to an enrollee in a state high risk pool. Many state high risk pool enrollees have had prior coverage, and are more likely to be receiving ongoing treatment for any pre-existing conditions. PCIP enrollees, conversely, have to be uninsured for a minimum of six months before applying for coverage, so, by the time they are covered by PCIP, they are more likely to need immediate treatment for an illness that has become serious or even critical during the waiting period. Furthermore, people who qualify for PCIP might be postponing paying for enrollment until their coverage needs become crucial, and, therefore, expensive, the CCIIO theorizes.

PCIP enrollment increased by nearly 400% between November 2010 and November 2011, and it is estimated that nearly 50,000 people with pre-existing conditions were enrolled in PCIP by the end of 2011. From August through November 2011, approximately 8,000 applications were received by PCIP every month. About half of those were submitted to the federally-administered PCIP.

Congress has, so far, provided $5 billion for payment of claims and administrative expenses in excess of premiums collected by enrollees. Claims have already been two-and-a-half times higher than anticipated, the CCIIO says.

PCIPs are a good deal for those who desperately need insurance, especially since costs for serious illnesses may easily exceed PCIP premium and out-of-pocket costs. Enrollees receive health coverage at premium rates that healthy people pay in the individual insurance market. Premiums may only vary based on age, geographic area, and tobacco use, and PCIP covers at least 65% of total average costs for covered benefits. Premiums can range, in the federally-administered PCIP, from $214 to $559, depending on an enrollee’s state of residence and plan option. Out-of-pocket costs are limited for covered, in-network services to the amount paid by someone enrolled in a high deductible health plan (HDHP) who is eligible for a health savings account (HSA). This amount is set by the Code every year. For 2012, it is $6,050.

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