A Surprising Source of an Intra-Party Fight: The PCIPs

This week we’ve seen an unusual development – perhaps the first serious proposal in the U.S. House of Representatives to significantly expand a provision of the Affordable Care Act since the law was enacted. Not surprisingly, the ultra-conservative Club for Growth released a strongly worded statement in opposition to this House bill. Much more surprisingly, that bill is sponsored by House Republicans and passed – on a party line vote – out of the Energy and Commerce Committee on Wednesday. It is expected to go before the House Rules Committee next week.

The program these Republicans want to expand is the Pre-existing Condition Insurance Plan (PCIP) program, which created temporary high-risk pools for the long-term uninsured. I wrote about the PCIPs in CHIRblog last February, shortly after the Administration announced its intention to close their doors to new enrollment. While the PCIPs were designed as a temporary bridge to the Affordable Care Act’s sweeping insurance reforms in 2014, the Administration was forced to end the program earlier than expected because claims costs were higher than expected, and the federal funding for the program – it was allotted $5 billion – was running out.

There are many provisions of the ACA I’d like to see expanded or improved (the generosity of the premium tax credits being first on the list), and I’m glad to see the U.S. House of Representatives considering a proposal to improve the law.  However, I’m generally a believer in policymaking based on the evidence of what works and what doesn’t. Unfortunately, the evidence is pretty strong that – even though they can provide lifesaving help to the people enrolled in them, high risk pools are not a sustainable solution to helping people with pre-existing conditions.

Prior to the ACA, about 34 states had high risk pools. Most enrollees in these pools pay considerably more than standard rates. While some state high risk pools have worked well for people, in general these programs have fallen short of being a viable source of coverage for people’s health care needs. Florida’s high risk pool has been closed since 1991, most impose pre-existing condition exclusions for up to a year, and many impose annual or lifetime caps on coverage. Even with these restrictions, these high risk pools have racked up losses of hundreds of millions of dollars, in part because very few people can afford the premiums that would be required for a high risk pool to break even.

In order to sustain effective high risk pool coverage for all those who need it, the federal government would have to invest much greater resources in subsidizing these plans. The necessary subsidization is so large because high risk pools only take in those with the highest costs, so the average cost per enrollee is very high. As noted in recent Congressional testimony by Commonwealth Fund Vice President Sara Collins, “the experiences of both the PCIP program and the state high-risk pools demonstrate the profound inefficiency of segmenting insurance risk pools.”

In its Congressional alert urging opposition to the bill (H.R. 1549) the Club for Growth notes that the PCIPs create “the moral hazard of avoiding insurance until it is needed.” What the Club for Growth does NOT go on to say, unfortunately, is that a better approach lies in the ACA’s comprehensive reforms, which are designed to spread the costs of people with very high health care costs broadly across the population, so that everyone has a little bit of shared responsibility.

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