PCIP Provides Bridge For Looming Healthcare Reform

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From Forbes:

By DAVID A. LIEB –07.25.11, 10:21 AM EDT

JEFFERSON CITY, Mo. — One of the first prongs of President Barack Obama’s health care law has been in effect now for a year, and the result in Missouri is that about 500 additional people with chronic health problems now have insurance.

It is, by most accounts, an underwhelming result. Missouri’s experience is pretty typical of the national norm, which is causing even some supporters of the federal health care law to question how it is being implemented.

One of the less-publicized provisions of the 2010 law required a Pre-Existing Condition Insurance Plan in each state. Backed by $5 billion of federal subsidies, the health plans are intended to provide insurance at lower prices than typically available to people with health problems who have been uninsured for at least six months.

The new health insurance plans provide a bridge to 2014, when a new requirement kicks in prohibiting insurers from charging higher premiums to people based on their health status. That’s the same year that most people will be required to have health insurance or face tax penalties, and that people will be able to purchase coverage through new online health insurance markets called exchanges.

When Missouri began taking applications in July 2010 for its federally mandated Pre-existing Condition Insurance Plan, officials expected to cover about 3,000 people, said Vernita McMurtrey, executive director of the Missouri Health Insurance Pool. One year later, it has just one-sixth of that amount – about 500 enrollees.

Missouri is not unique.

“Enrollment is fairly low across all states,” said Jennifer Tolbert, director of state health policy at the nonpartisan Kaiser Family Foundation.

Relying on estimates from the Congressional Budget Office and a unit of the Centers for Medicare and Medicaid Services, the U.S. Department of Health and Human Services said last July that it believed between 200,000 and 400,000 people likely would enroll in the new health plans.

The actual number is but a fraction of that. Through May 31, a total of 24,712 people nationwide were enrolled in the pre-existing condition insurance plans.

Health care analysts and insurance executives cite several reasons for the lackluster response.

Chiefly, the health insurance premiums still are more expensive than many people can afford – or want – to pay.

Federal law prohibits the plans from charging more than the state’s standard individual health insurance premium for people of a similar age. That means chronically ill people can get insurance policies at the same cost as healthy people. But many chronically ill people who have gone without insurance for six months either are unemployed or in low-wage jobs, which makes it difficult for them to afford even the standard premiums.

Under Missouri’s plan, for example, a 50-year-old man who opts for a $1,000 deductible would pay a monthly premium of $544, McMurtrey said.

That would consume about half the paycheck of someone working 40 hours a week in a minimum wage job, without accounting for taxes, housing payments, food, utilities and gas for a car.

Missouri lowered its premiums by 25 percent, effective Feb. 1, in an attempt to make the plan more affordable. Program administrators currently are analyzing whether they can lower rates again, McMurtrey said.

Until now, “Missouri hasn’t been really creative in how to get the lowest prices,” said Thomas McAuliffe, a policy analyst at the Missouri Foundation for Health.

Not helping matters was the fact that many people – at least initially – found Missouri’s application for the program confusing, McAuliffe said.

Another factor holding down enrollment is the requirement to first go without insurance for a half year, Tolbert said.

“There are probably a lot of people – at least some people – who have existing insurance, but it’s fairly limited, who would likely benefit by enrolling in the better coverage,” she said. But “they’re simply not going to be willing to go bare, as we say, for six months to access the better coverage.”

Still another factor is the tendency of some people to avoid purchasing insurance until they know it’s needed, said Larry Case, executive vice president of the Missouri Association of Insurance Agents. Even though vehicle liability insurance is required by state law, about 14 percent of Missouri drivers lack it, Case said. Some people purchase car insurance only because it’s necessary to license their vehicle, then quit making payments, he said.

Similarly, Case said, people have little incentive to purchase health insurance under the pre-existing condition plan until they know they are headed to the hospital or have a major medical expense upcoming.

McMurtrey said many people who enroll in the plan immediately use their health coverage, in some cases have major operations such as heart bypass surgeries or organ transplants within two or three weeks.

Although some health care analysts said Missouri’s program has not been sufficiently publicized, McMurtrey said she has traveled the state to discuss it at hospitals, nursing homes, community centers, schools and with any group that can spread the information among those with chronic health problems.

“Even though the 500 itself is not a high number, we are serving needy Missourians,” she said. “Quite honestly, across the country, none of the states have the enrollment we thought we would.”

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