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- As many as 4 million Americans could be covered by more generously funded high-risk pools
- Pre-existing condition insurance plans represented a poorly designed, half-hearted gesture within the ACA
- Instead, we should commit a series of capped annual appropriations to support continued operations of state HRPs
Thank you Chairman Pitts, Vice Chairman Burgess, and members of the Subcommittee for the opportunity to speak this morning on protecting
Pre-existing condition insurance plans (PCIPs) represented a poorly designed, half-hearted gesture within the Affordable Care Act (ACA), aimed primarily at minimizing political risks rather than addressing a serious problem more immediately and comprehensively. PCIP coverage served more as a cosmetic patch to cover the consequences of slow implementation of complex coverage provisions scheduled to begin nearly four years after enactment of the ACA.
The program never received sufficient funding to do its job seriously. That indicates where it stands in the relative level of priorities for the drafters of the law. The relatively small amount of funding and limited attention to the program’s structural details appear to conflict with the exaggerated rhetoric of the Obama administration in claiming that the extensive problems of lack of coverage for tens of millions of Americans with pre-existing health conditions were the primary political rationale for enacting the ACA’s regulatory, coverage, and financing provisions. .
The political ideology behind the core policies of the ACA (installing guaranteed issue, community rating, mandated coverage, richer standard benefits, and federal regulation of health insurance) trumped targeting the smaller, but significant, problem of several million Americans with limited or no insurance coverage due to serious pre-existing health conditions and addressing it more effectively.
The PCIP program managed to solve less of the problem (enrolling fewer individuals), at a higher per-person cost, while still running out of money. Not bad for government work! At the same time, it discouraged continuation beyond 2013 of better, tested, state alternative mechanisms (better-funded high-risk pools).
By setting its premiums for all at no more than standard rates --- contrary to better practices of older state high-risk pools (HRPs) which charge more, and also imposing a “6-month spell as uninsured” to qualify for coverage, PCIP only succeeded in mostly enrolling very desperate, high-cost individuals who had no other alternatives for coverage.
States administering pre-ACA HRPs did a better job by charging enrollees somewhat higher premiums, offering less comprehensive coverage, and focusing on those individuals who presented the most serious and costly medical conditions. However, they, too, still need more robust sources of funding to do their job more thoroughly and effectively.
Simply trying to average (and hide) the same total health care claims costs across a somewhat wider base (the ACA approach) may redistribute them, but it does not reduce them.
If the forthcoming health exchanges are plagued by premium spikes, implementation misfires, limited enrollment, and adverse selection, they may more closely resemble somewhat larger versions of state-level PCIPs than more competitive alternatives to the current private insurance market.
Policymakers should consider the following:
- Recognize that health care markets are local, not national. So too are problems for persons with high-cost conditions.
- The rhetoric of delegating administration of sensitive health policy provisions to state governments needs to be matched by the reality of federal officials letting go of tight reins and trusting state officials with more discretion over eligibility, benefits, and appeals issues, within much broader outcome-oriented federal parameters.
- Be very cautious about imprecise estimates (guesses) regarding the scale, scope, and costs of the medically uninsurable and others with inadequate resources to handle very high-cost/high-risk health conditions.
- Commit a generous amount of a series of capped annual appropriations to support continued operations of state HRPs and/or restructured PCIPs, to be revisited upon subsequent evidence of larger enrollment demand or higher (but medically necessary) costs. Avoid early commitments to open-ended entitlement formulas
- Publicly subsidizing the high-cost “tail” of health risks can strengthen the rest of the insurance market.
- Raise unsubsidized premiums charged for most enrollees in high-risk pool plans (to at least 150 percent of standard rates), but then provide income-based subsidies for lower-income persons. Separate the issue of income support from that of protection against losing or lacking coverage solely due to elevated personal health risk.
- Complementary policy reforms can help (establish better portability from group to individual market with creditable coverage, don’t require exhaustion of COBRA benefits, retarget premium subsidies, build information transparency mechanisms that reward better patient choices and provider practices)
- Keep as many older state HRPs as possible in business post-2013, as an “insurance” policy against major problems in exchange implementation and individual mandate enforcement/compliance. Allow such coverage to be considered “qualified insurance” under ACA to minimize post-2013 disruptions in the continuity of coverage and care.
- If the overall costs of health care don’t rise more slowly, and individual incomes don’t rise more rapidly, in the near future, no amount of subsidized insurance tinkering can keep up with a larger problem.
- Remember that the pre-existing condition issue is still a largely limited, modest problem. Solve it, instead of using it as a political excuse to hijack the REST of the private insurance market.
Thank you. I look forward to your questions.