Worries surface over transfer of state’s pre-existing condition program to feds

Effective Monday, July 1, Pennsylvania will no longer oversee its special insurance program for people with pre-existing health conditions, often known as a “high risk pool” or “pre-existing condition insurance plan” (PCIP).

Many state leaders, however, are not pleased with the transfer of PA Fair Care to a federal agency and worry it might cause disruptions for enrollees.  Pennsylvania’s not alone, either. Sixteen other states are transferring the program back to the Centers for Medicare and Medicaid (CMS).

Temporary by design 

Pennsylvania has operated PA Fair Care since it started in 2010. It’s a federally funded program that offers insurance to people who otherwise wouldn’t be able to get it. A little more than half of states oversee their programs, with the federal government overseeing the rest.

The plans offered through these high risk pools aren’t necessarily cheap, but they tend to be less expensive than what’s offered on the private market for people who have serious health issues. To be eligible, a person must be uninsured for at least six months prior to enrolling.

As part of the Affordable Care Act, these pools were intended to serve as a bridge for people until 2014 hits, at which point insurance companies will no longer be able to deny people with pre-existing conditions health coverage or charge them an especially high amount, compared to the general population. People will also be able to access insurance on new state-based marketplaces, or health exchanges. Enrollment in that program begins October 1.

Funds running low

The federal government set aside $5 billion for the high risk pools, with the intent of fully funding them through 2014. Pennsylvania’s contract was for $160 million, according to the insurance department. But the pools, partially subsidizing coverage for people often in need of costly medical care, turned out to be more expensive than expected. In February, health officials notified states that the pools couldn’t accept new enrollees, effectively shutting out any new people who wanted to enroll as of March 1.

There are 6,916 people were enrolled in Pennsylvania’s plan at that time, making it one of the more successful pools and surpassing the original prediction that it would serve a total of 5600 enrollees in 2013, according to the state’s insurance department. State insurance commissioner, Michael Consedine, and others weren’t pleased with the policy change. In a letter to U.S. Health and Human Services Secretary, Kathleen Sebelius, Consedine said the federal announcement was “very troubling” and called on Sec. Sebelius to reconsider the decision.

“Suspending enrollment in March creates a 10-month gap in the availability of health insurance coverage for individuals who would have been served by PA Fair Care – where are these individuals supposed to go to access coverage?” Consedine wrote. “In order to minimize coverage disruptions and allow time to prepare for a successful transition to exchange products, we request that you revert to the previously discussed timetable.”

PA program transfers to feds

In April, PA Fair Care hit another bump. CMS notified states overseeing the pools of another contract change, one that in some cases would mean states had to absorb some of the costs of the program. CMS’ new contract offer, effective June 1, would provide “a ceiling amount on costs that would be reimbursed through the end of the program,” CMS, a branch of HHS, wrote in a letter to states. “The revised contract would give you the ability to make necessary changes to premiums, benefit design, cost sharing, provider networks, utilization practices…”

States not wanting to accept the new terms could turn the pools over to CMS to run. The choice put Pennsylvania in a bind, according to the insurance department and state lawmakers.

“In essence, you are asking the Commonwealth of Pennsylvania to either end the program or potentially fund at the state level a current federal program. We respectfully disagree with your two options,” Commissioner Consedine wrote in a May 10 letter to CMS. “The abrupt ultimatum allows no time for the Commonwealth to budget funds even if it could bear such costs for the continuation of this program.”

Ultimately, Pennsylvania made the switch, effective July 1. Notification letters went out to enrollees in June. Republican state representative Matthew Baker wasn’t happy about the change but said Pennsylvania had no choice, given the state’s own budget challenges.

“It’s regrettable,” Baker said. “But it was unnecessary. If the federal government had kept their promise and pledge to the department of insurance and the Commonwealth of Pennsylvania, then we wouldn’t be in this mess.”

Possible Disruptions

Sixteen other states made a similar decision, of the 27 states that run their own pools, according to the National Conference of State Legislatures. Michael Keough, chair of the National Association of State Comprehensive Health Insurance Plans, a trade group that represents 21 of the state-run pools (not including Pennsylvania), worries about what the transition will mean for enrollees.

“I don’t think cms set out to have this sort of disruption with 6 months remaining and unfortunately that’s what has happened,” Keough said.

He said a woman from the Philadelphia area recently contacted him with concerns about her deductible changing and about the lack of clarity from doctors about whether they would accept the new federal PCIP plan.

“This adds this interim step for a population of people who by definition need to have health insurance because they’ve got serious conditions that warrant it,” Keough said. “So I think it’s an unfortunate complication.”

Rep. Baker agrees.

“Pennsylvania had a very successful program and obviously it was the preference here in Pennsylvania to not subject Pennsylvanians to possible disruptive impact of having to transition them to a new plan which arguably may require them to change doctors or hospitals,” Baker said.

The federal program’s administrator, Highmark, has been working to roll over enrollees to the plan. In an emailed statement, a spokesperson for CMS said having them take over the programs will ensure the transition in 2014 will be a smooth one.

“The Pre-existing Condition Insurance Plan has been serving tens of thousands of Americans for several years and continues to provide important coverage to people with few alternatives. These actions will help ensure the program’s smooth transition to 2014, when the new market reforms will be implemented and insurance companies will no longer be able to deny coverage because of pre-existing conditions.”

Nationwide, more than 100,000 people are enrolled in high risk pools. Not all states are transferring enrollees over to a federal administrator. New Jersey, for example, will continue operating its program. It hasn’t been as big or as costly as the one in Pennsylvania, however. 1520 people were enrolled in the program, which operated on an estimated $20 million budget. New Jersey is also one of a handful of states that already prohibits medical underwriting, so insurance companies cannot turn people away due to a health condition. 

Prior to 2010, Pennsylvania was one of 15 states that did not already operate any sort of high risk pool, but what it does have is an “insurer of last resort.” Blue Cross in Pennsylvania has a policy that it won’t reject anyone, no matter how sick they are, but the company can price the plans accordingly.

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