Pre-existing Condition Insurance Plans (PCIPs) under the Affordable Care Act of 2010

1. Commonwealth Webinar October 7, 2010 Pre-existing Condition Insurance Plans (PCIPs) under the Affordable Care Act of 2010 Jean P. Hall and Janice M. Moore University of Kansas

2. Background on the PCIPs • Included in PPACA legislation; to be implemented within 90 days of passage • $5 billion total allocation • Immediate availability of coverage for uninsured individuals with pre-existing conditions; interim to Exchanges in 2014 • Different from state high-risk pools: • No waiting period for coverage • Premiums at standard rate • OOP capped at $5,950 • Eligibility transferrable to other states

3. Administration • Overall, 27 states chose to administer their PCIPs: • 20 out of 35 high-risk pool states • 4 out of 5 open enrollment states • 3 out of 5 guaranteed issue states • 0 of 5 with no existing safety net programs • PCIPs for the other 23 states and the District of Columbia are federally administered • Presented an equity dilemma for states with existing high-risk pools because premiums are generally less for the PCIP coverage, but current state pool members can not switch

4. State and federal pools Note: FL pool closed to new enrollment since 1991

5. PCIP potential enrollees Total potential pool as many as 6 million based on uninsured and having at least one chronic condition HHS cites various enrollment estimates ranging from 175,000 to 400,000. PCIPs make individual market coverage available to people with pre-existing conditions An average state high-risk pool enrollee incurs about $10,000 per year in claims

6. Plan variability Other than basic stipulations, HHS gave states a great deal of latitude in how to design their PCIP coverage—in part to accommodate existing laws/programs and in part due to the tight timeline Many states with existing high-risk pools simply used one or more of those plans The result is a great deal of variability in coverage and benefits from state to state

7. PCIP premiums PCIP premiums may vary on age (4:1), tobacco use (1.5:1), geographic area, and deductible Monthly premiums for a non-smoking 50-year-old range from $240 for a $5000 deductible plan in UT to $1006 for a $1500 deductible plan in AK; flat premiums in PA and NY For the same federally-administered plan, premiums range from $330 in HI to $556 in FL; $455 on average (uses a 2.1:1 age ratio) Premiums are capped at market rate but can be lower

8. Deductibles, cost-sharing, OOP Fifteen states offer plans with deductibles at or below $1,000 The most common deductible is $2,500, but as high as $5,000 Most use 20% co-insurance; 3 states use 30%; 1 uses 25% and 1 uses 15% PPACA ceiling for OOP is $5,950 in 2010, indexed to HSAs; all federally-administered plans and many state plans use this as their limit Washington and Maryland have the lowest in-network OOP limit at $1,500

9. First dollar (or outside the deductible) coverage Allows participants to access some services immediately without first meeting their deductible Most commonly includes preventive care and prescriptions; some office visits with copays May be especially important for people with multiple chronic conditions because large deductibles can create access barriers A possible feature for plan enhancement

10. Regulatory Impact Will produce savings by reducing mortality, morbidity and medical expenditure risk while increasing worker productivity through reductions in absenteeism and low productivity due to illness. Reduce cost-shifting for uncompensated care. Provides an important source of coverage for some with pre-existing conditions until exchanges are implemented in 2014.