One lesson learned from problems at the Pre-existing Condition Insurance Plan (PCIP) program is that reinsurance can help government health insurance programs as well as private-sector plans.
The full implementation of the Patient Protection and Affordable Care Act (PPACA) has just begun, but for patients with pre-existing conditions and the PCIPs that served them, the months leading up to now have been challenging and fraught with uncertainty.
PCIPs were created in March 2010, when PPACA, or “Obamacare,” became law.
Under PPACA, PCIPs were run by either state or federal officials. The plans were supposed to remain in existence until Jan. 1, 2014, when PPACA would require traditional insurance carriers to accept patients with pre-existing conditions.
PCIPs would provide a temporary bridge for those who could not get medical coverage until health care reform went into full effect.
Congress allocated $5 billion to support the program. Twenty-seven states agreed to manage their own PCIPs, and the U.S. Department of Health and Human Services (HHS) managed the PCIPs itself in the other states and the District of Columbia.
However, early in 2013, a problem arose in that expenditures for the PCIP program were running higher than projected. In response, on March 3, 2013, the Center for Consumer Information and Insurance Oversight (CCIIO), the arm of HHS responsible for administering the PCIP program, suspended new PCIP enrollment.
Then, in May 2013, CCIIO told each state-run PCIP that it would have to renegotiate its federal contracts. As part of that process, each state would be given a limited amount of funding to run its PCIP from June 1 through the end of the year.
If a state decided to sign the ongoing contract, it would assume financial responsibility for paying any and all claims occurring during that period and would not be able to renegotiate with HHS for additional funds if claims were higher than projected.
According to NASCHIP — the National Association of State Comprehensive Health Insurance Plans — all but 10 states decided not to sign an ongoing contract. Most states let CCIIO assume responsibility for administering their PCIPs.
For managers of the Oklahoma Temporary High Risk Pool (OTHRP), Oklahoma’s PCIP, and the Health Insurance Risk Sharing Plan Authority (HIRSP), Wisconsin’s PCIP, handing control over to HHS was not a desirable outcome.
Managers of the Oklahoma and Wisconsin PCIPs were also unwilling to accept unlimited claims liability for the rest of 2013, and they were unwilling to disrupt the medical care of patients battling life-threatening illnesses.
So, in May 2013, representatives from those two PCIPs approached Guy Carpenter to look for another solution.
The PCIPs shared the same goal: to create an affordable reinsurance program that would cap their claims liability and be compatible with ongoing negotiations with HHS.
The PCIPs ended up using aggregate stop-loss reinsurance programs.
Each PCIP retained a pre-determined percent of its expected claims — a “ceiling” — for a seven-month period.
If claims exceeded the ceiling, the reinsurer would reimburse the PCIP for the excess amount, up to a predetermined maximum. After capping the total claims liability, Oklahoma and Wisconsin were able to negotiate enough funding from HHS that they were comfortable they would not be assuming any financial risk.
The PCIPs were able to continue to serve members through 2013 with no disruption in coverage. Officials in Oklahoma and Wisconsin have been able to focus on helping members move from the PCIPs into exchange plans.