Insurance program for pre-existing conditions runs dry

Funding under Affordable Care Act was meant to last til 2014, when insurance exchanges kick in

Pre-Existing Condition Insurance Plan

The federal Pre-Existing Condition Insurance Plan, known as PCIP, is a temporary high-risk health insurance program that covers people who have been rejected by private insurers because of existing health problems. The $5 billion program serves as a bridge until January when people with pre-existing conditions can buy coverage on the online health insurance exchanges called for under the Affordable Care Act. To qualify, an individual must be a U.S. citizen and have been without health coverage for at least six months. He must also have a pre-existing condition or have been denied health coverage because of a health condition.

The insurance plan covers nearly 135,000 Americans with about 3,500 of those in Georgia. Last year nationwide, the average cost per enrollee totaled about $32,000. Enrollees have a maximum out-of-pocket yearly limit for in-network services of $6,250.

Federal officials stopped accepting applications on Feb. 16, after the program began running out of money.

Bobby Mitchell didn’t like Obamacare but thought it was his only hope.

Trying to buy health insurance for his family, the Fayette County small business owner got rejected again and again by insurance companies because he has Type 2 diabetes.

But his hope crumbled last month when a federally-funded health insurance plan for people with pre-existing conditions froze enrollment. The program began running out of money far more quickly than expected as claims costs surged past estimates.

Created three years ago under the Affordable Care Act, the temporary program was supposed to last until January 2014 when online health insurance exchanges created under the law are to be up and running.

Its premature demise has Mitchell worried the government may not be up to the task of assuring affordable insurance.

“I’m not really sure they understand what they’re up against,” he said.

Obamacare critics say the miscalcuation shows that covering millions more uninsured Americans will be much more expensive than the White House projected and could have disastrous consequences.

To supporters of the health care overhaul, the enrollment freeze highlights one of the core needs for the health care law in the first place — to expand coverage to people with pre-existing conditions who are otherwise uninsurable.

Caring for people with existing, often multiple, chronic illnesses is a key goal of President Barack Obama’s health care law. They are some of the mostly sickly and costly patients in the country.

‘We’ll have to see’

When federal officials launched the Pre-Existing Condition Insurance Plan three years ago, they estimated that about 375,000 people would gain coverage. It was intended essentially as a bridge to the Obamacare exchanges and it was funded with $5 billion to subsidize coverage.

But those signing up turned out to be much more expensive than anticipated.

They had cancers, heart disease and other chronic illnesses that required major surgeries and long, costly hospitalizations. Roughly 3,500 Georgians are covered by the program.

The program required people to go without insurance for six months before they could apply — leaving their diseases uncontrolled.

“That pretty much ensured they were going to get a much sicker (and expensive) population than the general insured population,” said Bill Custer, a professor at Georgia State University and one of the top health care policy analysts in the state.

Nationwide in one year, less than 5 percent of enrollees accounted for more than half of the insurance claims. From May to October of last year, federal and state payments averaged $160 million every month, a recent federal report showed.

“This program has successfully served more than 135,000 Americans and provided needed security to some of our nation’s sickest people,” a spokesman for the U.S. Department of Health & Human Services said. “We have monitored program spending closely, and we have already made adjustments, such as lowering provider payment rates.”

People in the program pay monthly premiums based on what healthy people pay in the individual insurance market, varying only based on age, geographic area and tobacco use. The average monthly premium for a Georgian age 45 to 54 is $383.

Despite their disdain for Obamacare, top Republican lawmakers including House Speaker John Boehner have called on the Obama administration to use money from other health law programs to reopen the program, but no new money has been allocated so far.

Starting in January, people without employer-provided insurance will be able to compare prices and plans on the exchange websites, and they could qualify for federal tax credits. Nearly 900,000 Georgians are expected to shop on the exchange.

Health care analysts say the interim program’s money woes don’t spell trouble for the exchanges. They say those will pool together many more people - both healthy and sick - to spread the risk.

There is some concern, however, that healthy people will opt to pay the relatively small fine for not getting insurance. That would leave a higher proportion of sick, costly patients using the exchanges — prompting insurers to boost premiums.

That fear didn’t play out in Massachusetts when it enacted a state version of universal health care, but the concern is still there, said Karen Pollitz, a private insurance expert with the nonprofit Kaiser Family Foundation.

“How much that will turn out to be the case, we’ll have to see,” Pollitz said.

‘A gigantic mess’

For now, federal health officials say people already enrolled in the pre-existing condition insurance program will continue receiving benefits.

But people who didn’t apply before the money ran low - like Mitchell - are out of luck.

The 53-year-old owner of Prima Music, which sells educational music books to customers around the world, ardently opposes big government. But, he said, there’s a problem when insurance companies won’t insure people who have pre-existing conditions but are still in relatively good health overall.

He got group coverage several years ago for his eight to 12 employees but dropped it after years of rising premiums. Premiums for only himself, his wife and two daughters would have cost $25,000, Mitchell said.

He estimates his premiums would have been less than half that under the government insurance plan.

He learned about the program while searching for new coverage last fall. A government worker told Mitchell he had to go without insurance for six months before he could apply.

Mitchell, who had never gone without insurance, anxiously counted down the days to March 1, hoping no one in his family had a car accident or become seriously ill. He thought they would make it.

But with just a couple of weeks to go Mitchell saw a note on the program’s website that no new applications would be accepted starting Feb. 16. His heart broke. Now he has little faith in either the free market or government to assure affordable health insurance.

“The whole health care system is a gigantic mess,” Mitchell said. “Maybe the government wouldn’t have had to get involved if the private sector would have been doing what it should have been.”

Mitchell has applied to get his daughters, 21 and 22, individual insurance. He and his wife, meanwhile, are looking for a plan to get at least minimal coverage.

He’s skipping regular doctor’s office checkups. Their medicine supply is dwindling.

They face nine long months until the federal health care exchange opens — and then must hope it works as advertised.

“We’re both getting up in years.” he said. “Just going cold turkey without insurance was really a risky proposition.”