Temporary Federal High Risk Health Insurance Pool Program
Released: 2011-06-13T00:00:00

Introduction

Since 1975, a growing number of states (35 currently) have implemented high risk pools (HRPs), which offer nonprofit health insurance to individuals who are unable to purchase affordable coverage in the private market because of preexisting conditions. State HRPs often contract with a private health insurance carrier to administer the pool, and plan options can vary significantly both within pools and from state to state. The Government Accountability Office (GAO) estimates that nearly 4 million individuals were eligible in states with HRPs between 2005 and 2007. However, in 2008, only a total of 199,020 individuals (ranging from 300 in Florida to 27,386 in Minnesota) were enrolled in the 34 HRPs in operation during that time. The National Association of State Comprehensive Health Insurance Plans (NASCHIP) believes that the limited funding to subsidize the relatively high premiums charged for HRPs has restrained enrollment in the plans.

The Patient Protection and Affordable Care Act (PPACA, P.L. 111-148 , as amended) requires the Secretary of Health and Human Services (hereafter the Secretary) to establish a temporary federal HRP program to provide access to uninsured individual with preexisting conditions. Under PPACA, the federally financed HRP program is intended to help certain individuals with preexisting conditions obtain coverage for the period between June 23, 2010 (functionally the July coverage month) and January 1, 2014.

Temporary Federal High Risk Pool Program

The temporary HRP program, or the Pre-Existing Condition Insurance Plan (PCIP ) as it is commonly referred to, is intended to provide transitional coverage for uninsured individuals with preexisting conditions until January 1, 2014, when group health plans and health insurance issuers of group or individual health insurance coverage will be prohibited from having preexisting condition exclusions. Also effective for 2014 is the "guaranteed issue" provision requiring health insurance issuers in the individual or group market to be available to every employer and individual in the state that applies for coverage. Thus, individuals with preexisting conditions should not require a PCIP on or after January 1, 2014, because they will have access to health insurance coverage in the reformed insurance marketplace.

A PCIP can be administered either by a state or by the U.S. Department of Health and Human Services (HHS). The HHS-administered PCIPs are operated by the Government Employees Health Association, Inc. (GEHA), a non-profit insurance carrier. States that administer their own PCIP may use a different name and insurance carrier. For example, North Carolina named their PCIP "Inclusive Health: Federal Option," and the pool is operated by the North Carolina Health Insurance Risk Pool, Inc., a state sponsored non-profit organization. As illustrated in Figure 1 , slightly more than half of the states (27) have accepted responsibility for administering their own PCIP plan, while 23 states and the District of Columbia (DC) requested that HHS run the program on their behalf. A list of PCIP websites is available in Table A-1 .

Program Administration

PPACA provides that the Secretary may carry out the federal HRP program directly or through contracts to eligible entities. In order to carry out the program, and other PPACA private health insurance provisions, the Secretary created a new Office of Consumer Information and Insurance Oversight (OCIIO) within the Office of the Secretary (OS). Within OCIIO, the Office of Insurance Programs (OIP) was established to be responsible for administering the temporary high risk pool program and associated funding to states. Richard Popper, who previously directed the state of Maryland's high risk pool, was appointed the director of the OIP. On January 26, 2011, OCIIO was reorganized as the Center for Consumer Information and Insurance Oversight (CCIIO), a component in the Centers for Medicare and Medicaid Services (CMS). Steve Larsen currently serves as the Deputy Administrator and Director of CCIIO, and the OIP is now the Insurance Programs Group, still under the direction of Richard Popper.

Funding for Eligible Entities

To be eligible to contract with the Secretary for the PCIP, an entity must either be a state or nonprofit private organization. For the other 23 states and DC, HHS issued a request for proposals for a PCIP third party administrator on May 25, 2010. HHS chose the Government Employees Health Association, Inc. (GEHA), from the 14 non-profit organizations that expressed interest in the program. GEHA is also currently a Federal Employee Health Benefits Program (FEHBP) carrier.

PPACA appropriated $5 billion to pay claims and the administrative costs of the temporary HRP that are in excess of the amount of premiums collected from enrollees beginning on July 1 2010, until the program ends on January 1, 2014. There has been some concern that the funding amount is inadequate for the program. Richard Foster, the chief actuary of the Centers for Medicare and Medicaid Services, estimates that by 2011 or 2012 the initial funding will be exhausted, "resulting in substantial premium increases to sustain the program." CBO concurs that $5 billion will not be enough to cover the costs of all applicants through 2013.

Many of the states that elected not to participate cited the funding as their reason. For example, Texas Governor Rick Perry in a letter to the Secretary stated that the funding is insufficient and that "state officials could be forced to reduce health coverage, raise premiums or ask state taxpayers to pay" for the HRP. Similarly, Wyoming Governor Dave Freudenthal wrote the Secretary expressing the concern "that the allotted money may prove to be insufficient to fully operate this program until 2014." If HHS estimates that there will be a funding shortage, then the Secretary has the authority to make any program adjustments necessary to eliminate the deficit.

The Secretary has proposed allocating funds for the program by using a formula similar to what was used for the State Children's Health Insurance Program (CHIP), whereby funds would be allotted to states using a combination of factors, including nonelderly population, nonelderly uninsured, and geographic cost, as a guide. The Secretary intends to reallocate the unspent state allotments after a period of not more than two years, based on an assessment of enrollment and expenditure experiences of each state. A breakdown of the proposed funding by state is provided in Table A-2 .

Eligibility Criteria

The PCIP program is intended to supplement existing state HRPs. Indeed, existing state HRP enrollees are ineligible for the federal program because federal enrollees must be without credible coverage for a six-month period prior to the date on which the individual is applying for coverage through the federal PCIP program. Credible coverage is defined by §2701(c) of the Public Health Service Act (PHSA) as a group health plan, health insurance coverage, Medicare Part A or Part B, Medicaid, coverage from the Department of Defense, a medical care program of the Indian Health Service (IHS), a state health benefits risk pool, the Federal Employee Health Benefits Program (FEHBP), a public health plan (as defined in regulations), or a health benefit plan under the Peace Corps Act. The criteria is based on enrollment in credible coverage, not on access to it. In other words, PCIPs are permitted to deny eligibility based on an applicant's enrollment in creditable coverage during the six-month period prior to applying for PCIP, but they may not deny coverage to an otherwise eligible individual merely because the individual has access to credible coverage.

Eligible individuals must also have a preexisting condition, as determined by the Secretary. In the interim final rule published on July 30, 2010, the Secretary established the following criteria for determining if an individual has a preexisting condition for the purposes of PCIP eligibility: (1) the individual provides documented evidence that an insurer has refused, or has provided clear indication that it would refuse, to issue individual coverage on grounds related to the individual's health; (2) the individual provides documented evidence that he or she has been offered individual coverage but only with a rider that excludes coverage of benefits associated with a preexisting condition; (3) the individual provides documented evidence that he or she has a medical or health condition specified by the state and approved by the Secretary for inclusion in PCIP; or (4) other criteria as defined by the PCIP and approved by the Secretary.

Finally, eligible individuals must be a citizen or national of the United States or be lawfully present in the United States. To assist in determining citizenship or nationality, HHS is creating a new computer matching program with the U.S. Office of Personnel Management (OPM), the Social Security Administration (SSA), and the Department of Agriculture's National Finance Center (NFC). This program will allow for the matching between agency systems of the following data fields: name, address, date of birth, Social Security Number (SSN), and Tax Identification Number (TIN).

Application Procedures and Enrollment

To apply for the PCIP administered by HHS, eligible individuals must submit an application and supporting materials indicating their eligibility. The PCIP has both paper and online application options available. Prospective applicants can also call to request a mailed copy of the application at 1-866-717-5826 (TTY 1-866-561-1604). The application requires basic personal information, indication of citizenship or immigration status, information about the applicant's medical condition or diagnosis that makes the individual eligible, and information about previous health insurance coverage. PCIP applicants must also supply a copy of a letter dated within six months of the application from an insurance company or health plan showing that they had been completely denied individual coverage because of a preexisting condition, or were offered coverage but were denied certain benefits because of a preexisting condition. Federal HRPs administered by the states may develop their own application procedures, and thus some variation has been observed. Specific state contacts for applications are available at the Pre-Existing Condition Insurance Plan website.

The Congressional Budget Office (CBO) estimated around 200,000 individuals would be enrolled on average over the 2011-2013 period, based on the assumption that HHS will only spend the $5 billion appropriated in PPACA. However, CBO expects that if the program spending were not capped and 65% of medical costs were covered, then federal spending through 2013 would be between $10 billion and $15 billion and enrollment would be expected to grow from approximately 400,000 in 2011 to as high as 700,000 in 2013. As of the enrollment figures released on February 1, 2011, 12,437 individuals have enrolled in PCIPs (see Table 1 for PCIP enrollment by state).

The reasons for the lower than expected enrollment have not been independently researched yet. Nevertheless, CCIIO explained in the CMS FY2012 budget justification submission that in the initial months of the program, efforts were focused on establishing the program within the 90-day time period required by PPACA and this compressed implementation schedule necessitated focus on operational matters (e.g., developing claims adjudication, enrollment, and premium collection systems) rather than devoting substantive effort on an education campaign. CCIIO is now working on public education efforts. In testimony before the House Committee on Energy and Commerce, Subcommittee on Oversight and Investigations, CCIIO Director Steven Larsen stated that

CCIIO has an aggressive strategy to encourage enrollment of eligible individuals, meeting with local doctors, hospitals, consumer groups and chapters of advocacy groups like the American Cancer Society and American Diabetes Association. For example, we are working to reach local stakeholders and providers who come into contact with people with chronic care needs in need of insurance to spread awareness about the PCIP program. We have actively reached out to provider groups through webinars, arranged meetings with potential partners in at least six States, and will continue this outreach in the coming months. CMS is also working with agencies that have a history serving individuals with disabilities, such as the Social Security Administration. Since February 15, 2011, all applicants for Social Security disability benefits have been informed about the PCIP program through application receipts. These collaborations leverage existing communication channels with individuals who have a pre-existing condition and may therefore be eligible for the PCIP program.

On May 31, 2011, HHS announced that the eligibility standards will be eased to facilitate enrollment in the states where the PCIPC are federally administered. Starting July 1, 2011, applicants may merely provide a letter from a doctor, physician assistant, or nurse practitioner dated within the past 12 months stating that they have or, at any time in the past, had a medical condition, disability, or illness. Applicants will no longer have to wait on an insurance company to send them a denial letter.

Plan Benefits and Premium Rates

Specific coverage policy (e.g., providers and procedures covered and prescription drug formularies) is not addressed by the law. In other words, section 1101 PPACA does not require nor expressly prohibit certain providers, procedures, prescriptions drugs, or medical technology. However, the Secretary does have the authority to establish additional requirements for the program that can be used to establish coverage policy. With respect to network adequacy, the Secretary established by regulation that each PCIP may specify the network of providers it contracts with, but the PCIP must demonstrate to HHS that it has a sufficient number and range of providers to ensure that all covered services are reasonably available to enrollees. The Secretary further established that PCIPs must cover certain benefit categories listed below. Specific covered items and services within these broad coverage categories may vary between PCIPs. The Secretary also established the following excluded coverage categories: (1) cosmetic surgery except to restore bodily function or correct deformity resulting from disease; (2) custodial care except for hospice; (3) in vitro fertilization, artificial insemination or any other artificial means used to cause pregnancy; (4) abortion services except when the life of the woman would be endangered or when the pregnancy is the result of an act of rape or incest; and (5) experimental care except as part of an FDA-approved clinical trial.

PPACA also establishes certain benefits requirements with respect to the value of the PCIP coverage. To be a qualified PCIP, the health insurance coverage must have an actuarial value of at least 65% of the total allowed costs. The means that the PCIP's average share of the total the costs of the coverage benefits must be at least 65%. The coverage must also have an out-of-pocket limit no greater than the applicable amount for high-deductible health plans linked to health savings accounts, which is $5,950 for an individual in 2011. This means the total annual cost-sharing requirements, including deductibles, cannot exceed $5,950. This limit, however, does not apply to deductibles and expenses for out-of-network services if the plan uses a network of providers. There is considerable variation in cost sharing between states and PCIP options within a state. For 2011, PCIP medical deductibles range from $0 to $5,000 and for PCIPs with separate drug deductibles the range is $100 to $500. After the deductible, some PCIPs have a coinsurance requirement while other PCIPs use flat dollar co-payments. For example, PCIPs that utilize coinsurance typically require around 20% for a primary care visit, while the flat dollar co-payments for the same visit in other PCIPs is typically around $20 to $25.

Certain PPACA requirements for the PCIP are designed to make premium rates fair and affordable. By law, premium rates for the PCIP must be established at a standard rate for a standard population and age rating cannot exceed a factor of 4 to 1. PPACA also subsidizes premiums by appropriating $5 billion for the payment of claims and administrative costs of the PCIP that are in excess of the amount of premiums collected from enrollees. In addition to the population and age rating factors, PCIP premiums vary considerably by state and by plan benefit factors, such as, the size of the deductible. For 2011, monthly premiums for PCIPs administrated by a state range from $69 to $1,806 and for the federal PCIPs premiums range from $116 to $842.

Reducing 2011 Premiums

In order to reduce the out-of-pocket premium costs that may have been high enough to discourage enrolling in the PCIPs, HHS announced on May 31, 2011, that it would be reducing premiums in the federally administered PCIPs. Effective July 2011, premiums will drop an average of 20.67%. These premium decreases help bring PCIP premiums closer to the rates in each state's individual insurance market ( Table 2 ). In Hawaii, Idaho, Massachusetts, North Dakota, Vermont, and Wyoming, PCIP premiums were similar to the individual market and will not be reduced. HHS concurrently released guidance to the states on how they may reduce premiums in the state-administered PCIPs. To date, it is unknown how many states plan on adjusting premiums in their PCIPs.

Appendix. PCIP Program Tables