Obamacare Pre-Existing Conditions Coverage: Low Enrollment, High Costs
Alyene Senger /
J.M. Guyon/ZUMA Press/Newscom
One of Obamacare’s main selling points during the health care reform debate was the need to provide insurance coverage to those with pre-existing conditions—but like other aspects of the law, the plan is failing those it was intended to help.
Beginning in 2014, Obamacare will prohibit insurance companies from excluding anyone with a pre-existing medical condition from coverage (called guaranteed issue). Because this incentivizes people to wait until they’re sick to purchase coverage, Obamacare includes the dreaded individual mandate to force all Americans to purchase health insurance.
But these massive new insurance mandates don’t take effect until 2014, so in the meantime the law set up the pre-existing conditions insurance plan (PCIP), which funded new high-risk pools in each state, providing coverage to those with pre-existing conditions from 2010 to 2014. The PCIP was allocated $5 billion for that time frame.
In 2010, the Obama Administration estimated that 375,000 people would enroll in the PCIP. But as of January 2013, over two-and-a-half years since the plan began, only 107,139 were enrolled—less than 29 percent of original projections.
Despite such low enrollment, the PCIP is running out of money. By nature, the enrollees in this insurance pool are high-cost because they are already sick, but government cost projections were way off, as is typical for government-run health care programs. In a 2012 report, the Administration conceded that claims’ costs had been 2.5 times greater than they had anticipated.
The Centers for Medicare and Medicaid Services (CMS) has thus suspended enrollment in the plan last month, leaving many people with pre-existing conditions out of luck. For instance, a woman with breast cancer learned of the suspended enrollment and tried to apply as quickly as she could but is unsure if her application was accepted, stating, “I feel like the rug has been pulled out from under me. On every level, this is just beyond discouraging.”
In addition to suspending enrollment, CMS made major benefit adjustments in an effort to control program costs—mainly by increasing enrollee cost-sharing requirements. These changes included the consolidation of three plan options into one, increased co-insurance, and increased maximums for out-of-pocket costs (a 56 percent increase for in-network services and a 42 percent increase for out-of-network services).
In sum, the issue was overestimated and the costs were underestimated. The PCIP experience shows that the number of individuals facing pre-existing condition exclusions was not nearly as large as it was made out to be, and certainly didn’t require an insurance market takeover to fix it. Moreover, the higher-than-projected costs could be an indication that other cost projections for Obamacare ($1.8 trillion in new spending) are also underestimated.
To read about commonsense insurance market reform that would protect those with pre-existing conditions, click here.