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Thank you Chairman Pitts, Vice Chairman Burgess, and members of the Subcommittee for the opportunity to speak this morning on protecting America’s sick and chronically ill.
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:
Thank you. I look forward to your questions.
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