Death of the High Risk Pool? New Federal Program Endangers the State Plan
New Programs Make The Decision As Clear As Mud
As I learn more about the new developments related to the Healthcare Reform Act, – now called the Patient Protection and Affordability Act (Is that great marketing spin or what?), I continue to shake my head and wonder if the intent of the entire bill was to destroy the existing infrastructure of medicine and make insurance unaffordable to everyone that currently has it to protect their family. If that was the intent congratulations should be bestowed upon the crafters of this fine legislation!
One area that we should be watching is the new federally sponsored PCIP health plan. PCIP is short for the Pre-Existing Condition Insurance Plan. This plan is essentially a health insurance backstop plan for those US citizens with no health insurance as a result of their medical conditions. As of 8/1/2010 this program began offering coverage. As with all well run government sponsored organizations, the program began in fine fashion. When I started researching the program on 7/15/2010 the website and the call centers could provide no details on the cost to insureds or even provide a summary of benefits! That didn't keep the lady at the phone bank representing the plan from suggesting that I send in an application anyway! Perhaps it is just me, but I like to know what I'm going to get for my money when I apply for programs and also like to know how much it will cost!
As mentioned above, the plan did actually roll out on 8/1/2010 though and it seems as though the plan did get final pricing and a plan summary description. I will highlight those costs and benefits below as they are really the focus of this post. Once I was able to obtain the pricing for the plan, it became all too clear that the Texas High Risk pool was going to get a run for its money in covering Texans. As a result of this analysis we all need to be aware that the rich offerings in the PCIP plan may mean the demise of the High Risk Pool and the abuse of the federal plan at taxpayer cost.
Coverage For The Uninsurable
Let's dispel a few myths right here and now. During the public debate on health care (of course no specifics about what we'd get or how we'd pay for it were ever discussed) we all heard that we didn't have health insurance for so many US citizens, especially those people with pre-existing conditions. Every time I heard that statement I wanted to scream at the radio and TV. In Texas we've had something called the High Risk Pool (for those with resources and a pre-existing condition), Medicaid (for the poor), Medicare (for the disabled), and the county hospital system for the procrastinator (lazy) or those in between rich and poor. We also have laws that require emergency rooms and fire stations to treat you if you are in need of medical attention. So with my last statement, you should have a clear understanding that if you believe that health care is a "right", then you had your rights met here in Texas. The Texas High Risk pool is a state sponsored plan that is managed by Blue Cross Blue Shield of Texas. If an applicant had been declined (or would have been declined) by an individual carrier for a medical condition, a person could use the High Risk Pool to obtain insurance as long as that person could afford the expensive prices. The only complaint I ever hear about the high risk pool is that it so expensive.
Let's Talk Money
I've examined a few of the options for coverage so we are all on the same page. I'll use a 39 year-old male, non-smoker, living in zip code 77057 for a date beginning 10/1/2010.
Traditional coverage – Blue Cross Blue Shield of Texas Select Choice – $2,500 Deductible – $186 / month. This plan has unlimited office visits with a $25 co-pay and a $3,000 max for this insured's portion of co-insurance which is an 80/20 split. It offers a prescription drug plan with a separate $200 deductible.
Texas High Risk Pool – $2,500 Deductible – $532 / month This plan has 6 office visits with a $30 co-pay and a $3,000 max for this insured's portion of co-insurance which is an 80/20 split. It offers a prescription drug plan with a separate $200 deductible. (Pretty similar right?)
Federal PCIP Rates for Texas – $2,500 Deductible Plan – $387 / month This plan offers $25 co-pays for office visits and a $3,450 max for this insured's portion of co-insurance which is an 80/20 split. It offers a prescription drug plan however it only kicks in after the $2,500 deductible has been met. (This is about the only poor thing you can say about this plan). (Make sure you scroll to the end to see the strict requirements to obtain this plan, not everyone can apply for it!)
Individual Plan With Blue Cross – It's actually sad to say it, but the plan with the worst benefits is actually the individual plan offered by Blue Cross (the Select Choice Plan). While this plan is solid, it lacks some specific benefits like mental health care that are covered under the High Risk Pool. Of course, there is no coverage for maternity on individual or family plans in Texas.
High Risk Pool – Although this plan is the most expensive, it does offer more benefits than the individual plan with Blue Cross. Mental health benefits are included here and the benefits are quite robust. In the high risk pool there are no maternity benefits.
PCIP Plan – The PCIP plan offers the most generous plan benefits, but as usual you must foot the bill to receive the benefits. While the plan construction is a bit different with the need to meet the $2,500 deductible for any non-office visit services (prescriptions) it does provide an interesting set of benefits that are clearly not offered in traditional individual plan. Again, benefits like mental health are covered, but also we find that the federal government's version of a health plan includes maternity coverage.
As I weigh the benefits for all of these plans there are several factors to consider. First we examine premium cost, second, I consider the benefits that a person receives without having to pay large sums out of pocket (office visits and prescription drug deductibles and co-pays), and finally I consider the benefits for special circumstances. Clearly if a client had a special health issue that was covered in one plan, but not another we'd overweight that benefit in the analysis. Finally, we have to examine the total cost or risk in a worst case event or maxed-out case where we have to pay the maximum for the plan annually.
Since we're looking at a person that has a serious pre-existing medical condition the maximum out of pocket amount for them would be the following:
Texas High Risk Pool – $2,500 Deductible + $3,000 Co-Insurance Max = $5,500 Annual Max Total
PCIP Plan – $2,500 Deductible + $3,450 Co – Insurance Max = $5,950 Annual Max Total
At first glance you might think that the High Risk Pool is the winner, and it is making a strong case, but let us also look at the costs when we add the difference in premiums since the Federal PCIP plan is cheaper by $145 per month. When we examine this, the High Risk Pool is still the clear overall winner.
High Risk Pool annual premium plus maximum out of pocket = $11,884 (one other difference all co-pays paid in the pool for office visits and prescriptions do not go toward meeting the maximum out of pocket)
PCIP annual premium plus maximum out of pocket costs = $10,594 (all co-pays for office visits and prescription drugs are counted toward meeting the maximum out of pocket).
Funeral Dirge Is Being Played For The High Risk Pool
There you have it, we've established that it is clearly better to be healthy in Texas and for that great health you are rewarded with lower health premiums. If you aren't so fortunate and you are a Texan with a pre-existing health condition you now have two choices. You may choose the Federal PCIP plan or the existing Texas High Risk Pool. As long as funding exists a person with a pre-existing conditions that meet the program requirements should consider opting for the federal plan.
Due to the analysis above, it is hard for me to recommend the state sponsored High Risk Pool. Monthly costs savings and the maxed-out scenario make it difficult to argue for the existing state plan.
A Texas-Sized Loophole - Maternity
As you can probably tell from my writing above, I emphasized that both the individual health plan for the healthy person and the Texas High Risk Pool do not offer maternity coverage. If there is any complaint I have about the current system in Texas is that there is no state mandate that carriers offer maternity coverage! What a joke and shame on our legislature and insurance commission for allowing such a poor lapse in leadership to happen on their watch. I speak with men and women every day that are desperately looking for a health option for maternity coverage.
Several years ago there were two reputable carriers that actually offered maternity riders. (United Health's Golden Rule and Humana). In the last two years, both insurance companies stopped offering those riders. Now, no matter if a person has insurance or is without individual insurance coverage in Texas, they are left to pay cash for the delivery of their children! Can you imagine how bad I feel as an agent telling them that they are looking at expenses of $7,500 to $15,000 or more to deliver a child? (We disclose on every document that maternity is not covered by any individual policy!) So why am I droning on about this subject? The point I'm try make is that the Federal PCIP program does earn high marks in my book because it does offer maternity coverage. In addition, this may be the solution for so many women that need coverage.
In the scenario where a woman has a child she'd pay the $2,500 deductible for the delivery, and then 20% of the costs until she had paid another $5,950 more. Let's break down the cost to her further using a hypothetical $15,000 delivery charge (physicians, hospital, and nurse's total charges).
$15,000 – $2,500 deductible = $12,500
20% of the $12,500 = $2,500
The total delivery cost would be in the PCIP for delivery would be $5,000. (Remember those $387 a month premiums too though!)
This solution looks pretty good for the mother. One other consideration to keep in mind is that the baby will automatically be covered for 30 days under the PCIP plan (not sure about the cost) but after that, the child will need to be covered under another policy. (Call us at 713-422-2935!)
In this situation, I highly advocate the use of the PCIP plan for this specific application because it offers benefits where the other plans don't.
Government Intervention Breeds Cost Minimizing and Bad Insured Behavior
You have to be wondering where I'm going with this, but hang on; I'm an analyst at heart if you couldn't tell. So readers that are pregnant or planning to be pregnant have to be saying to themselves, "this PCIP plan sounds like a good deal (the only deal in Texas if you don't have employer provided health care with maternity), but why would I pay an entire 10 months of coverage, why don't I only participate in this coverage for 2 or 3 months? I think I'll wait to get coverage so I'll limit my premiums!" Well, this is the exact type of thinking that this plan fosters.
Since this plan requires that the applicant cannot have had insurance or the option for insurance (COBRA) in the last 6 months, it sets up the plan for maximum abuse by very healthy mothers that are simply being turned away from other carriers because they are pregnant. These expectant mothers can obtain coverage when they most need coverage at the end of their pregnancies, use the benefits of the plan to their fullest, and then move on to other coverage upon delivery. This type of thinking is exactly the opposite of what you want as an insurance plan provider. You actually want high levels of participation, for long periods of time, from those that are less likely to make claims. In this scenario, you reward smart mothers that limit their time paying premiums, have a defined short period of time in the plan, and have a 100% chance of a claim.
In my opinion, this is where government intervention and best intentions end up bankrupting our country. Individuals make economic decisions that maximize their own benefit rather than playing along with the herd like a government expects. The type of abuse or decision maximization that I highlighted will be the very thing that destroys many of the dollars allocated toward the program. I believe we are going to hear very shortly that the plan is out of money and in need of serious cash injections. While this PCIP plan is only set up to be a bridge between now and the rollout of the 2014 final health plan it still is offering pregnant Texans a Texas sized loop-hole.
Restrictions For Participating In The PCIP Program
Before I go, I want to highlight the restrictions that the federal government has placed on participation in the PCIP program. In order to qualify for this coverage a person needs to have been;
1) Declined for a pre-existing medical condition (must have a written decline letter)
2) Be a US Citizen (some other folks can participate too, but mostly those from US territories) – or a legal resident.
3) Not have been covered under creditable health coverage (as defined by Section 201(c)(1) of the Public Health Service Act) for the previous six months before applying for coverage.
The last item really makes me angry. I understand that the legislators wanted to keep people from jumping ship from high risk pools to this plan by sticking in the 6 month rule, however these are the very folks that have not utilized the High Risk Pool here in Texas. Why give these same people rewards for not taking action already?! It is never a good thing to reward bad behavior and I believe strongly that this program does just that.
Sources and Links
Final Note- I wrote this post to inform readers of the options out there for folks with pre-existing conditions. I am heartbroken daily when I speak to men and women that call our agency desperately wanting insurance only to find that they don't have many options. I am excited to be able to offer them another choice in the form of the PCIP program. Of note though, I have also seen a very troubling trend in that when a family member is declined for coverage (usually the father) they suddenly abandon the thought of coverage for the rest of the family! I can't tell you how many angry men I've spoken with over the years that are frustrated by insurance companies and then refuse to obtain health insurance for their wives and children because they were offended that a health company made a decision about his health issue. My hope is that families will have the wisdom to obtain health insurance for all members of the family even if it means that a member must obtain coverage through the PCIP plan or the High Risk Pool.
If you have questions please call us at 713-422-2935 or you can obtain a quote directly from this site for traditional health plans and HSA plans by clicking our Get a Quote page.
Agents do not sell the PCIP plan, so you will need to go to their site to learn more. We can help you obtain coverage for the High Risk Pool if you need assistance.
Also, I want to give a hat tip to one of our readers – Tracy. Tracy, thanks for the clarification of co-insurance data, you were right on. We confirmed this information directly with a conversation and the outline of coverage – where the summary documentation was quite unclear. Second, we neglected to add the "legal resident" aspect of the qualifications, but have added that item to provide the entire bulletpoint.
I appreciate your comments and clarifications to keep us on track!