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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