Suspension of PCIP (Pre-Existing Condition Insurance Plan)

The Department of Health and Human Services (HHS) has suspended the Pre-Existing Condition Insurance Plan (PCIP) authorized by the Patient Protection and Affordable Care Act (PPACA).  This comes as a surprise, as the PCIP stop-gap program for uninsurable individuals was designed to accept new enrollments through the end of this year, prior to full implementation of PPACA guaranteed issue rules on 1/1/2014.

Why did HHS suspend PCIP enrollment?
The federal government states, on its official health care website, "PCIP is a temporary program for those locked out of the current insurance marketplace.  The program has a limited amount of funding from Congress.  Based on program experience and trends since the start of the program, PCIP enrollees have serious and expensive illnesses with significant and immediate health care needs.  This suspension will help ensure that funds are available through 2013 to continuously cover people currently enrolled in PCIP."

The federal website notes that individuals who recently lost PCIP coverage due to moving may be eligible to re-enroll in PCIP in their new residence state.  To learn more, click here to visit healthcare.gov.

From the viewpoint of many, including Rep. Morgan Griffith (R-Va.) the early shutdown of the PCIP program does not bode well for the fate of PPACA as a whole.  At a U.S. House of Representatives Energy and Commerce health subcommittee meeting today, Griffith remarked, "are we making promises we can't fulfill when we say we're going to cover everybody?"

Douglas Holtz-Eakin, a former Congressional Budget Office director, observed that PPACA defines "affordable" when a consumer spends less than 10% of income on health care.  Unfortunately, the U.S. as a whole now spends nearly 20 percent of national income on health care.  Based on that disconnect, the former CBO stated, "By definition, not all of us can have affordable health care... the law will never add up for everybody in the United States.  It cannot."

Regardless of how the numbers add up, it seems disappointing that PCIP enrollments were suspended more than nine months earlier than expected.  Clearly, this is detrimental to the 50-64 age group most likely to enroll into PCIP due to a pre-existing medical condition.  This demographic group often is described as vulnerable by proponents of PPACA, who advocate for the 3:1 rating rule that keeps premiums lower for older people but shifts those costs to younger people.

In my last blog post, I noted that actuarial studies suggest the average 64-year old exceeds a 5:1 cost ratio, as compared to the average 21-year old.  So while PPACA proponents are busy advocating for the 3:1 rating rule to protect the 50-64 demographic group, HHS strikes an even bigger blow to that same group by suspending PCIP enrollments - leaving newly uninsurable individuals with less options for the next nine months.  So much for early retirement!

Until next time,

Andrew Herman
AH Insurance Services, Inc.
 

Letting Insurance Benefit Everyone Regardless of Their Youth (LIBERTY Act)

Rep. Dr. Phil Gingrey (R-Ga) Introduced H.R. 544 on February 6, 2013

 

Last month, Rep. Dr. Phil Gingrey (R-Ga) introduced H.R.544 in order to challenge the age rating rules written into the Patient Protection and Affordable Care Act (PPACA), also known as Obamacare.  Dr. Gingrey’s bill would allow the states, not the federal government, to determine their age-rating bands to prevent spiking insurance costs for young, healthy people that could propel them to leave the health insurance market in droves.

 

As called for by PPACA, insurance companies must limit the difference in health premiums due to age to a 3-to-1 ratio.  From an actual cost perspective, it can demonstrated through actuarial studies that the average 64-year old exceeds a 5-to-1 cost ratio, as compared to the average 21-year old.  To make up the difference, the costs will be subsidized by young people in the form of higher premiums, with some increases expected to be in the 30-40% range.

 

The LIBERTY Act allows states to determine the age discount in their insurance market.  Should a state fail to act, the legislation establishes a rating which better reflects the correlation between age and health care costs.  Click here to read Dr. Gingrey's 1/29/2013 Letter to Congress.

The bill’s chances in the Democratic-controlled Senate are uncertain. In today’s times, with younger people burdened at an unprecedented level by student loans, unemployment and under-employment, I can only wish that wisdom will prevail and H.R. 544 will be passed.

Until next time,

Andrew Herman

AH Insurance Services, Inc.