High-risk plans tally low uptake yet surprisingly steep costs

Key Points

From third quarter 2010 through February, more than 56,000 people have signed up for PCIPs nationwide. However, that number is well under initial projections that more than 200,000 people would enroll, mainly because of the high cost of participation. In response to lower-than-anticipated participation, the Department of Health and Human Services cut premiums in the 24 state high-risk pools that it runs, which has brought some gains. The remaining PCIPs are administered by a state entity, often the same one that runs the state high-risk pool.

PCIP applicants must have evidence of a pre-existing condition or insurance denial and not have had insurance for at least six months. Premiums cannot exceed rates for standard individual coverage in that state. Before the advent of PCIPs, 35 states already were operating their own high-risk pools, which remain and enroll a combined 220,000. Premiums in the state plans can be twice as high as PCIP coverage, but those already enrolled in state high-risk pools are subject to the six-month waiting period before they could switch to a PCIP.

In Utah's case, the state received an initial $43.7 million to cover the expected 2,400 enrollees in its PCIP program, says Tomi Ossana, executive director. Since its founding in September 2010, Utah's PCIP has attracted 837 members, who have nearly exhausted the funds. There is no waiting period, so participants with chronic conditions can access care immediately after coverage becomes effective.

"The nature of a high-risk pool is that you'll have peaks and valleys," says Ossana, who also administers the state high-risk pool. "You'll have a transplant and two preemies one month and then nothing extraordinary the next."

The state pool has 3,600 members, down slightly since the Utah PCIP began. To set premiums in the pool, the top five small-employer index rates are averaged, and rates cannot exceed 150% of the standard risk rate. For every premium dollar in the state pool, the state pays $1.50 in claims, with the rest covered by the state legislature each year. For federal PCIPs, every premium dollar results in $8 in claims, Ossana says.

"Our actuaries do a really good job," Ossana says. "We thought there would be pent-up demand, then a leveling off. But that didn't happen."

However, she notes improvement in medical and drug claims.

Alaska expects to spend $10 million of its total $13 million federal PCIP allotment this year to cover 50 members, for an average of $200,000 per enrollee.

New Hampshire has secured additional federal funding for its PCIP, notes Mike Degnan, executive director for the New Hampshire Health Plan, which administers both the state and federal plans. The state plan had 2,751 enrollees as of the end of March, with 424 people in the PCIP. Pricing for the PCIP is 100% of the standard risk rate and 125% for the state pool that was established in 2002. The state pool is funded through assessments on carriers that operate in the state.

"The level of usage shows how sick some people are," Degnan says. "If you think logically about it, these people were using their money for food and housing. Clearly something happened in their lives to need insurance, and they have immediate needs."