Insurers and employers will be very, very sorry if they dump people with health problems into the new Pre-existing Condition Insurance Plan (PCIP) programs.
The Office of Consumer Information and Insurance Oversight (OCCI), a new arm of the U.S. Department of Health and Human Services (HHS), made that point today in the preamble to an interim final rule implementing Section 1101 of Title I of the Patient Protection and Affordable Care Act (PPACA).
The section, part of the Affordable Care Act package, requires the OCIIO to work with the states to set up a temporary PCIP system to help tide uninsured people with health problems over until 2014, when a ban on use of personal health information in underwriting and pricing health coverage is set to take effect, and HHS and state governments are supposed to make standardized, subsidized health coverage available through a new health insurance exchange system.
OCIIO officials say in the preamble to the interim final rule that they decided to create an interim rule, rather than going through the full comment process needed to create a permanent rule, because Congress wanted states to set up PCIP programs as quickly as possible. The OCIIO will be accepting and reviewing comments on the interim rule while implementation is under way. Comments are due Sept. 28.
States are supposed to make PCIP coverage available to residents with pre-existing conditions who have been uninsured for at least 6 months. Rates are supposed to be comparable to the standard rates in a given market. Program managers can make premiums for the oldest insureds 4 times as high as the rates for the youngest insureds, but they cannot impose pre-existing condition exclusions.
Congress provided $5 billion in funding for program subsidies; experts question whether that amount will be enough to make PCIP coverage available to many high-risk uninsured people.
Part of the new interim rule concerns definitions.
Officials have decided, for example, that the term “pre-existing condition exclusion” “refers to a denial of coverage, or limitation or exclusion of benefits, based on the fact that the individual denied coverage or benefits had a health condition that was present before the date of enrollment for the coverage (or a denial of enrollment), whether or not any medical advice, diagnosis, care, or treatment was recommended or received before that date,” officials write in the preamble to the PCIP interim final rule, which appeared today in the Federal Register. “This would include exclusions stemming from a condition identified via a pre-enrollment questionnaire or physical examination, or the review of medical records during the preenrollment period.”
Insurers sometimes refuse to take applications from consumers with health problems, and the new rule means consumers can get PCIP coverage even if insurers have not formally rejected their applications, officials say.
States can work with HHS to fine-tune their criteria for deciding which applicants do and do not have pre-existing conditions.
OCIIO officials acknowledge in the preamble that PCIP funding might run out.
“Given the capped appropriation for this program, we
recognize that PCIPs need sufficient programmatic flexibility to manage their costs and enrollment, to help ensure that the PCIP program’s funding allocation is sufficient to cover claims and other program costs for the entire duration of the program,” officials say. “Thus, we establish authority … for a PCIP program to employ strategies to manage enrollment over the course of the program that may include enrollment capacity limits, phased-in (delayed) enrollment, premium and benefit adjustments that indirectly affect enrollment, and other measures, as defined by the PCIP and approved by HHS.”
HHS has the authority under PPACA Section 1101(g)(4) to take steps, such as increasing premiums, to eliminate a projected deficit, officials say.
ACA provisions will be requiring individual and small group insurers to spend at least 80% of premium revenue on medical costs and quality improvement efforts. The PCIP provisions do not apply a limit on PCIP administrative expenses, but the new interim final rule limits administrative costs to 10% of total allotted funds for the duration of the program, officials say.
“Typical examples of the types of administrative costs and expenses that we expect to be incurred by PCIPs include: start-up and program implementation activities, the production and distribution of information and outreach materials, eligibility determination and enrollment processing, claims processing, costs associated with prevention and detection of fraud, waste and abuse, and other ancillary services such as operation of a customer service call center, account maintenance, and appeals,” officials say.
A state can spend more than 10% of program funding on administrative expenses during the first year, when the state is setting up its PCIP program, officials say.
PPACA Section 1101(e)(2) gives HHS the authority to keep insurers from dumping high-risk, possibly high-cost individuals into the PCIP program.
The OCIIO is still developing regulations to keep public health programs, such as Medicaid, from dumping enrollees, but the new interim final rule includes anti-dumping regulations aimed at private insurers.
The new regulations require state PCIPs to “establish procedures to identify and report to HHS instances where health insurance issuers or group health plans are discouraging high-risk individuals from remaining enrolled in their current coverage, in instances where such individuals subsequently are eligible to enroll in the PCIP,” officials say.
If HHS decides an insurer or group health plan has dumped enrollees, the HHS secretary can bill the issuer or group health plan for any of the dumped enrollees’ medical expenses that are covered by the PCIP, officials say.
HHS also will refer any insurers or group plans that dump enrollees to law enforcement agencies, officials say.