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Life Health > Health Insurance

Why Is the Federal Risk Pool Program So Costly?

By Allison Bell

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One of the most popular components of the Patient Protection and Affordable Care Act — a special health insurance program for people with health problems — has had trouble providing coverage that sick people can afford in a sustainable way.

Jean Hall, a Medicaid researcher at the University of Kansas, and Janice Moore, a data manager at the university, have discussed the problems at the Pre-Existing Condition Insurance Plan (PCIP) program in a new report released by the Commonwealth Fund. 

The PCIP program has helped some people with health problems, but it is too expensive for most of the people who need it, the researchers said in the report.

Monthly premiums for a 50-year-old range are less than $300 in some states, such as Michigan and Virginia, but they are over $1,000 in Alaska and Washington state, and they can be over $500 in 11 other states, the researchers said.

Even though the premiums are high, the PCIP enrollees are so sick that the ratio of claims costs to revenue is very high, the researchers said.

The researchers have included state-by-state data showing that the ratio of medical losses to revenue at the PCIP plans is at least twice as high and, in some cases, 8 times as high, as the medical loss ratios at the comparable state “risk pool” plans.

In New Hampshire, the medical loss ratio for the state risk pool is 140% of the standard-plan loss ratio. The PCIP plan has a medical loss ratio equal to 1,230% of the standard-plan loss ratio.

In New Mexico, the state risk pool has a loss ratio equal to 442% of the standard-plan loss ratio. The PCIP plan has a loss ratio equal to 1,151% of the standard-plan loss ratio.

“Given the general lack of affordability of high-risk pool coverage at the individual level and the high costs of plan operation, the potential of high-risk pools as a vehicle for coverage expansion remains quite limited,” the researchers said.

Congress put the PCIP program in PPACA in an effort to provide immediate relief for uninsured people with health problems. PCIP is meant to help fill the gap between the date PPACA was signed in March 2010 and the day when insurers are supposed to start selling subsidized coverage on a guaranteed issue, mostly community-rated basis in 2014.

PCIP provides comprehensive health coverage for people who have a hard time qualifying to buy ordinary individual commercial health coverage.

Eligibility is not based on income. The price of coverage is supposed to be comparable to what healthy people would pay for health coverage purchased through the conventional market.

To avoid “crowding out” private health coverage, Congress required that people with health problems be uninsured for at least 6 months before applying for PCIP.

Congress let states choose between running PCIP risk pools themselves or letting the parent of CMS, the U.S. Department of Health and Human Services (HHS) provide PCIP risk pool services for residents. 

Originally, some analysts predicted that hundreds of thousands of consumers would sign up for PCIP coverage.

So far, only 78,000 people have bought the coverage, and only a few states are on track to use up their share of the $5 billion in PPACA PCIP funding by 2014, when the program is supposed to expire and current PCIP enrollees are supposed to be able to get standard coverage at standard rates through the new health insurance exchanges, the researchers said.

The anti-crowd-out provisions seem to be enrollment down and may be saddling PCIP plans with enrollees who are much sicker than the enrollees in the state plans, the researchers said.

“An early analysis of a sample of PCIP claims, for example, showed high rates of costly conditions such as cancer,” the researchers said. “The uninsurance requirement may also be a factor in the higher cost of PCIP enrollees. People who have been uninsured often have pent-up, high-cost health care needs. In addition, these individuals may not have a regular source of care and may not initially use coverage in optimal or cost-effective ways.”

Regulations prohibit PCIP programs from using methods such as limited open-enrollment periods or waiting periods to hold down costs, the researchers said.

The PCIP have probably saved the lives of some people with no other coverage options, but they also have high per-member claims costs, the researchers said.

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