Close Close

Life Health > Health Insurance > Health Insurance

On the Third Hand: PCIP

Your article was successfully shared with the contacts you provided.

The Centers for Medicare & Medicaid Services (CMS) should throw the book at itself for the approach it’s taken to shutting down the Pre-existing Condition Insurance Plan (PCIP) program. 

CMS announced Feb. 15, during a little-noticed conference call, that it was suspending new enrollment in the state PCIP programs it administers immediately, and that states would be winding down their own PCIP programs soon.

As in, very soon.

The Associated Press reported that Wisconsin will stop taking applications for its program March 2.

On the one hand: I’m sure that the people at PCIP are really, really nice, hard-working people who have many volumes of actuarial data to explain why they had to kill the program immediately, or face disaster.

But, on the other hand: Looking at this from the perspective of a naive layperson who might be hard to insure someday, I think it’s cruel of the government to simply shut down a program aimed sick people who just want health insurance overnight without giving potential applicants fair warning or providing a source of alternative coverage.

If a commercial insurer did something like that, analysts from the Henry J. Kaiser Family Foundation, Families USA, the Commonwealth Fund and Consumers Union would crush it under a blizzard of ice cold white papers. Congress would hold hearings. President Obama might make a short but withering remark.

Well, Mr. President: Where’s the withering remark?

The drafters of the Patient Protection and Affordable Care Act (PPACA) created the PCIP program in an effort to provide coverage for people with cancer, heart disease and other health problems that make getting conventional, medically underwritten coverage impossible.

The enrollees are supposed to pay what ordinary healthy individuals in their states pay for comparable coverage. The premiums may be $500 or more per month. PPACA provided subsidies to fill the gap between what the enrollees pay and how much enrollees spend on care with subsidies.

The PCIP program never worked very well, in part because of well-intentioned but clumsy provisions included in an effort to keep the plan from crowding out private insurance.

One provision, for example, requires PCIP applicants to have been completely uninsured for six months. 

The PCIP program managers did a notoriously poor job of relating to health insurance agents and brokers, even when the producers were eager to do business with them.

Because of those weaknesses, enrollment has been much lower than the PPACA drafters expected, and the per-enrollee claims have been much higher than expected.

It seems reasonable to think that the PCIP program might also have suffered from Republicans’ cynical, scorched-earth policy of refusing to cooperate with the Democrats enough even to help pass the kind of small, not especially controversial technical fix that might have made PPACA a more viable program.

But, still: It was a nice idea.

Some beloved readers here oppose any kind of government intervention in health finance, on principle, and I respect that view and recognize that this view will eventually prove to be the correct view. In the long run, we’re all dead, and water always flows downhill.

But, in the short run, even a lot of people who think of themselves as preferring free-market solutions want to force a little bit of water flow uphill as long as possible. They accept the idea that the government might play some role in helping the aged and the infirm and in regulating commercial health insurance.

For those people the questions are not so much whether it’s ethical for the government to get involved in health finance, or destructive for the government to get involved in health finance, but how much the government can get involved without making matters worse.

It doesn’t seem as if the PCIP program did any noticeable damage to any commercial health insurance markets that private health insurers wanted to be. The few times I talked to a broker who knew much about the program, that was because the broker was trying hard to get consumers with health problems into the program, even in the face of opaque PCIP program bureaucracy and PCIP managers lack of interest in paying the small broker fees they’d promised to pay.

Some state insurance regulators seem to be mad at private long-term care insurers because those insurers have been applying for big rate increases on their products and pulling out of markets.

But those insurers generally seem to take many months to get the rate increases through, and at least a couple of months after big changes are approved to implement the changes.

Quick-witted producers and prospects will get the message that they ought to jump quickly if they want coverage, or what coverage at the old rates.

In this case: CMS seems to have pulled the rug out from any consumers who were hoping PCIP could tide them over between now and Jan. 1, 2014, when the new PPACA restrictions on use of personal health information in issuing and pricing coverage are supposed to take effect.

Why can CMS say, “Hey, here’s a program you could apply for!” one day, and, “Poof! No you can’t,” the next?

Claude Thau, a well-known long-term care insurance (LTCI) actuary, has argued that the real reason the government should stay out of insurance as much as possible is that keeping the insurance providers and the insurance regulators separate provides much-needed checks and balances.

The regulators watch insurers like hawks partly because the regulators don’t really understand the insurers’ perspective all that well and don’t have much sympathy for the insurers.

Which might be hard on the insurers but is good, in many cases, for the insurers.

In the case of PCIP, the regulator is the insurer, and it seems that it’s been even worse as a regulator than it has been as an insurer.

On the third hand: It looks as if sequestration will be stopping giant chunks of the government on a dime in a few weeks. At that point, maybe the sudden death of the PCIP program will seem like just another one of the zillions of government program sudden deaths.

See also: