An early ObamaCare health insurance program that has been operating for nearly three years is foreshadowing big problems to come with the larger health overhaul law.
The law allocated $5 billion for a program to help uninsured people with preexisting conditions get insurance. It was designed to provide temporary bridge coverage until the health law takes full effect in 2014. But this temporary Pre-Existing Condition Insurance Plan is running out of money.
The Obama administration has closed enrollment to any new applicants, saying it needs all the remaining money to cover the medical costs of the 100,000 people already enrolled. And the costs are significant: the average cost per enrollee in 2012 was $32,108 a year. But the costs varied widely by state, from a low of $4,276 per enrollee to a high of $171,909. Some patients had annual claims as high as $225,000.
The administration had already tried cost-cutting measures: It raised the maximum a patient would have to pay out of pocket from $4,000 to $6,250 a year, cut what it pays providers, and limited the number of pharmacies that can dispense specialty drugs through the program. It didn’t work.
The problems with this program are predictors of the costs likely to come when the full law takes effect on January 1, 2014.
Exchanges Follow Same Path
Up to 20 million people are expected to enroll in the new ObamaCare Exchanges, scheduled to open this fall. Many of the triggers for exploding costs are the same as in the preexisting conditions program: ObamaCare health insurance must cover many more benefits than the policies most people have been purchasing, and even Health Secretary Kathleen Sebelius has admitted this will mean higher costs.
Higher costs, in turn, mean more people will decide to forgo coverage, especially the young and healthy people the individual mandate was supposed to drive into the insurance pools. They can pay a $95 fine instead of spending several thousand dollars on health insurance. And people have an added incentive to forgo health insurance because the law says they can wait until they are sick to buy coverage and still pay the same rates as though they had been covered all along.
This means most of the people enrolled in the ObamaCare subsidized insurance pools through the Health Insurance Exchanges will be older, sicker, and more expensive, just as happened with the temporary high-risk pool program.
This is a prescription for disaster. The ObamaCare Exchanges provide huge subsidies—$1 trillion over 10 years—to help people buy the expensive health insurance the law mandates. But many healthy people will find that the premiums, copayments, and deductibles they face will make this insurance very unattractive.
Supporting High-Risk Pools
If the ObamaCare Exchanges experience even a fraction of the excessive costs the high-risk pools have brought, Congress will have no choice but to cut eligibility, provider payments, or subsidies.
The best thing Congress can do right now is delay the start of the Exchanges as more information becomes available about the costs and complications and the administration’s experience with the Pre-Existing Condition Insurance Plan.
In the meantime, House Speaker John Boehner, Majority Leader Eric Cantor, and other top House Republican leaders wrote President Obama last month, asking him to support their efforts to shore up the fund.
“Republicans have historically supported high-risk pools and reinsurance programs. In fact, the House Republican alternative to PPACA provided $25 billion to aid Americans suffering from pre-existing conditions,” they wrote. They urged the president to support their efforts to move funds from other parts of the program into the preexisting condition fund so it can continue to accept new enrollees.
An estimated 4,000 people have been enrolling in the program every month. That means an estimated 40,000 people needing coverage will be turned away before the end of the year.
House leaders have offered a solid proposal that is likely to gain bipartisan support and protects those who most need insurance should implementation of the law be postponed because the exchanges aren’t ready. There has been no word from the White House in response to their letter.