Why the Pre-Existing Condition Insurance Plan (PCIP) fails

by Ray Carlson

As we all know, this past March Congress passed and the President signed The Affordable Care Act. One component of the new legislation was the creation of a program called the Pre-Existing Condition Insurance Plan (PCIP). This is a federally funded high risk pool for state residents who – having been denied individual insurance coverage within the past 12 months for a pre-existing condition – would now, theoretically, have ready access to health coverage.

That was the theory anyway. Unfortunately, while the health plan made available to applicants offered a solid lineup of benefits, it came at a price: High premiums. The plans are simply unaffordable for the vast majority of the segment of the population they were intended to serve.

When PCIP was created, the estimated audience for such a concept reached the millions while estimates of folks who would actually sign up for such a plan numbered in the hundreds of thousands. The latest count puts the number of current enrollees at less than 10,000 nationwide. A simple view from the trenches will tell you why: you can visit our California health insurance website for a quote and enter in just about any set of applicant (age) parameters and you’ll find that the ‘PCIP plan’ is a high-priced option. Especially so when you enter in age parameters of folks in older age brackets, each of whom is perhaps more likely to have a pre-existing condition. There’s an audible gasp on the other end of the line when we run a quote for older consumers in need of just what a pre-existing condition plan was intended to help with. Their audible gasp is usually accompanied by one of our own. The plan is simply priced out of reach of average consumers.

A concept that started with the best of intentions and the bright promise of bringing health coverage to scores of our nation’s citizens is now being reconfigured by the Department of Health and Human Services. The existing standard plan will see its premiums slashed by 20% in 23 states and the District of Columbia where the federal government operates the program – HHS is encouraging state-run PCIP programs to join in with a premium reduction of their own (the plan features a $2,000 medical deductible and a $500 drug deductible).  Beginning in 2011, the current ‘standard plan’ will be joined by two more plans: a second plan – with higher premiums and lower deductibles of $1,000 for medical and $250 for prescriptions. The idea for this plan level almost seems mindboggling: the premiums for this plan level will simply be breathtaking. A third plan will include a tax-advantaged health savings account and carry a $2,500 deductible.

The third plan option – a HSA-compatible health plan – is what caught our eye. If you’ve read our previous entries here at KevinMD.com you know we’re huge fans of the HSA concept. The HSA offers three primary benefits: Typically lower monthly premiums; the opportunity to reduce income taxes (and save money in a tax advantaged account) when contributing money to a HSA; and the personal empowerment that comes with spending your health care dollars the way you choose when it comes to decisions about how to spend your HSA funds.

While the growth in the use of HSA plans has been staggering, these plans have also taken some heat, and there’s even been speculation that health reform legislation may damage their ongoing application and use. However, it will certainly be interesting to see if this proven money-saver can show its mettle again and help bring affordability to a health plan concept (PCIP) that should be a huge boost to a segment of our population that could use some good news when it comes to health coverage.

Ray Carlson is a California health insurance agent and owner of California health insurance agency Vitality Health Insurance Services.

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  • Muddy Waters

    All of this talk is just spinning our wheels. As long as healthcare remains highly overpriced (from a syringe to a hospital admission), there will ALWAYS be inequality in it’s distribution. It’s as simple as that. The country (taxpayer) cannot indefinitely pick up the bill for an ever-expanding group of dependents. Liberals and Democrats know this, but continue their spending regardless in a misguided effort to secure votes and further their political careers. America needs to wake up and realize that a welfare state is doomed to failure.

  • http://www.seefirstblog.com Evan Falchuk

    Ray,

    Thanks for the very good post.

    The cost may be too high for the target market, but for what you get from the PCIP, it looks like a good deal to me.

    Maybe I am a cynic, but I think this PCIP plan is a giant loophole in the reform law.

    It makes it easy to force insurers to accept people with pre-existing conditions, while making sure they end up insuring very few of them indeed.

    More here: http://bit.ly/cKPsfs

    Cheers,

    Evan Falchuk

  • http://nostrums.blogspot.com Doc D

    TANSTAAFL.

  • http://blog.headache-treatment-options.com/appliedobjectivism/ David Allen, MD

    This is a great video which inadvertently points out the benefits of capitalism and the western world with respect to health:

    http://www.youtube.com/watch?v=jbkSRLYSojo&feature=player_embedded

    As always, you may not like it, but capitalism produces real results.

  • Doc99

    “if you think healthcare is expensive now, wait until it’s free.”
    PJ O’Rourke

  • Marc Gorayeb, MD

    The first step in getting some price competition and getting prices to come down is to require providers to start quoting the patient a price when getting consent for each test or procedure. This is where the government can actually play a role, because even I presently don’t have ready access to this informaiton for either my own health care or that of the patients I see.
    It seems that a lot of actors right now have an incentive to obfuscate pricing information. Count the government in on this ‘conspiracy,’ because Medicare and Medicaid are currently being subsidized through cost-shifting by providers of medical services.

  • Michele

    My husband and I have pre-existing conditions and are currently covered by a guaranteed issue plan through a private insurer. This insurance is bankrupting us. The premiums on this already exorbitant plan increased by $500 A MONTH last year. We could easily buy two new luxury cars EVERY YEAR for what we’re paying for health care. The government’s new plan for those with pre-existing conditions is a life saver. It will save us at least $13,000 a year. The only catch is that to qualify, we have to drop our private coverage and go bare for six months. We are among the lucky ones who can afford the new government plan — as long as nothing catastrophic happens to us during that six month waiting period. But that’s the choice. Go slowly bankrupt paying exhorbitant premiums to a private insurance company or risk bankruptcy by going without insurance for six months. It’s a very cruel choice, but then we wouldn’t want to make it easy for anyone to drop private coverage and switch to an affordable government plan, would we?

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