Temporary Federal High Risk Health Insurance Pool Program

Congressional research reportJun 13, 2011

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Temporary Federal High Risk Health

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June 13, 2011

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R41235

CRS Report for Congress

Prepared for Members and Committees of Congress

Temporary Federal High Risk Health Insurance Pool Program

Summary

This report briefly describes the temporary federal high risk pool (HRP) program, more

commonly known as the Pre-Existing Condition Insurance Plan (PCIP) program. The PCIP

program was established by the Patient Protection and Affordable Care Act (PPACA, P.L. 111148, as amended). Under PPACA, the PCIP program is intended to help individuals with

preexisting conditions who have been uninsured for six or more months to obtain health insurance

coverage before 2014. In 2014, coverage will be available on a guaranteed issue basis and

preexisting condition exclusions will be prohibited.

To be a qualified PCIP, the insurance coverage must have an actuarial value (the average

percentage of expenses that the plan covers) at least equal to 65% of total allowed costs, and outof-pocket costs cannot exceed $5,950 for an individual in 2011. The premiums must be

established at a standard rate for a standard population, and age rating cannot exceed a factor of 4

to 1. Claims and administrative costs will be subsidized by the federal government.

States can run the program or elect to have the Department of Health and Human Services (HHS)

operate the program in their states. Slightly more than half of states (27 states) contracted to

operate their own PCIPs. HHS administers the PCIPs in 23 states and the District of Columbia.

PPACA appropriates $5 billion of federal funds to support the program, available from July 1,

2010, until the program ends on January 1, 2014. Originally projected to have 200,000 or more

enrollees, the PCIPs had 21,454 enrollees as of April 30, 2011. This is a 168.65% increase from

the first enrollment statistics released on November 1, 2010.

This report provides an overview of the temporary federal high risk pool program and will be

periodically updated to reflect any legislative or regulatory changes.

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Temporary Federal High Risk Health Insurance Pool Program

Contents

Introduction...................................................................................................................................... 1

Temporary Federal High Risk Pool Program................................................................................... 1

Program Administration ............................................................................................................ 3

Funding for Eligible Entities ............................................................................................... 3

Eligibility Criteria...................................................................................................................... 4

Application Procedures and Enrollment.............................................................................. 5

Plan Benefits and Premium Rates ............................................................................................. 9

Reducing 2011 Premiums ................................................................................................. 10

Figures

Figure 1. Map of PCIPs Administered by the States or HHS .......................................................... 2

Tables

Table 1. PCIP Enrollment by State .................................................................................................. 7

Table 2. July 2011 Reductions in Federally Administered PCIP Premiums .................................. 11

Table A-1. PCIP Websites by State ................................................................................................ 12

Table A-2. Proposed Allocation of Federal Funds for Temporary High Risk Pools, by

State ............................................................................................................................................ 14

Appendixes

Appendix. PCIP Program Tables ................................................................................................... 12

Contacts

Author Contact Information........................................................................................................... 15

Acknowledgments ......................................................................................................................... 15

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Temporary Federal High Risk Health Insurance Pool Program

Introduction

Since 1975, a growing number of states (35 currently) have implemented high risk pools (HRPs),

which offer nonprofit health insurance to individuals who are unable to purchase affordable

coverage in the private market because of preexisting conditions.1 State HRPs often contract with

a private health insurance carrier to administer the pool, and plan options can vary significantly

both within pools and from state to state.2 The Government Accountability Office (GAO)

estimates that nearly 4 million individuals were eligible in states with HRPs between 2005 and

2007.3 However, in 2008, only a total of 199,020 individuals (ranging from 300 in Florida to

27,386 in Minnesota) were enrolled in the 34 HRPs in operation during that time.4 The National

Association of State Comprehensive Health Insurance Plans (NASCHIP) believes that the limited

funding to subsidize the relatively high premiums charged for HRPs has restrained enrollment in

the plans.5

The Patient Protection and Affordable Care Act (PPACA, P.L. 111-148, as amended) requires the

Secretary of Health and Human Services (hereafter the Secretary) to establish a temporary federal

HRP program to provide access to uninsured individual with preexisting conditions. Under

PPACA, the federally financed HRP program is intended to help certain individuals with

preexisting conditions obtain coverage for the period between June 23, 2010 (functionally the

July coverage month) and January 1, 2014.6

Temporary Federal High Risk Pool Program

The temporary HRP program, or the Pre-Existing Condition Insurance Plan (PCIP ) as it is

commonly referred to, is intended to provide transitional coverage for uninsured individuals with

preexisting conditions until January 1, 2014, when group health plans and health insurance

issuers of group or individual health insurance coverage will be prohibited from having

preexisting condition exclusions.7 Also effective for 2014 is the “guaranteed issue” provision

Lynn Gruber, “How state health insurance pools are helping Americans,” National Association of State

Comprehensive Health Insurance Plans, January 6, 2009. High risk pools are often called health insurance associations

or comprehensive health insurance associations. The Connecticut Health Care Act of 1975 created the first state high

risk pool followed by the Minnesota Comprehensive Health Association in 1976.

United States Government Accountability Office, Health Insurance: Enrollment, Benefits, Funding, and Other

Characteristics of State High-Risk Health Insurance Pools, July 22, 2009.

Ibid.

Kaiser Family Foundation, State High Risk Pool Programs and Enrollment, December 2008. Available at

http://www.statehealthfacts.org/comparetable.jsp?ind=602&cat=7. North Carolina established the 35th state high risk

pool in 2009. For more background information on state high risk pools, see CRS Report RL31745, Health Insurance:

State High Risk Pools, by (name redacted).

Lynn R. Gruber, “State high risk pools hold value in the era of health reform,” National Association of State

Comprehensive Health Insurance Plans Board of Directors, November 15, 2007. The National Association of State

Comprehensive Health Insurance Plans (NASCHIP) was created in 1993 to provide educational opportunities and

information for state high risk health insurance pools that have been, or are yet to be, established by state governments

to serve the medically “uninsurable” population.

Health plan and insurance enrollments generally are effective on a monthly basis, thus July 1, 2010, would be the

actual start date for coverage.

§1201 PPACA: §2704 PHSA. A preexisting condition exclusion means denying benefits for chronic illnesses or

injuries, like carpal tunnel syndrome, diabetes, heart disease, and cancer, that an individual had before obtaining the

(continued...)

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Temporary Federal High Risk Health Insurance Pool Program

requiring health insurance issuers in the individual or group market to be available to every

employer and individual in the state that applies for coverage.8 Thus, individuals with preexisting

conditions should not require a PCIP on or after January 1, 2014, because they will have access to

health insurance coverage in the reformed insurance marketplace.

A PCIP can be administered either by a state or by the U.S. Department of Health and Human

Services (HHS). The HHS-administered PCIPs are operated by the Government Employees

Health Association, Inc. (GEHA), a non-profit insurance carrier.9 States that administer their own

PCIP may use a different name and insurance carrier. For example, North Carolina named their

PCIP “Inclusive Health: Federal Option,” and the pool is operated by the North Carolina Health

Insurance Risk Pool, Inc., a state sponsored non-profit organization.10 As illustrated in Figure 1,

slightly more than half of the states (27) have accepted responsibility for administering their own

PCIP plan, while 23 states and the District of Columbia (DC) requested that HHS run the program

on their behalf. A list of PCIP websites is available in Table A-1.

Figure 1. Map of PCIPs Administered by the States or HHS

Source: U.S. Department of Health and Human Services.

(...continued)

current health insurance coverage.

§1201 PPACA: §2702 PHSA. Some states already have guaranteed issue requirements under state law.

Government Employees Health Association, Inc., “Pre-Existing Condition Insurance Plan administered by GEHA:

Benefits Summary,” July 2010, available at http://www.pciplan.com/forms/pdfs/BenefitsSummary.pdf.

North Carolina Health Insurance Risk Pool, Inc., “Inclusive Health - Federal and State Option,” 2010, available at

http://www.inclusivehealth.org.

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Program Administration

PPACA provides that the Secretary may carry out the federal HRP program directly or through

contracts to eligible entities.11 In order to carry out the program, and other PPACA private health

insurance provisions, the Secretary created a new Office of Consumer Information and Insurance

Oversight (OCIIO) within the Office of the Secretary (OS).12 Within OCIIO, the Office of

Insurance Programs (OIP) was established to be responsible for administering the temporary high

risk pool program and associated funding to states. Richard Popper, who previously directed the

state of Maryland’s high risk pool, was appointed the director of the OIP.13 On January 26, 2011,

OCIIO was reorganized as the Center for Consumer Information and Insurance Oversight

(CCIIO), a component in the Centers for Medicare and Medicaid Services (CMS).14 Steve Larsen

currently serves as the Deputy Administrator and Director of CCIIO, and the OIP is now the

Insurance Programs Group, still under the direction of Richard Popper.15

Funding for Eligible Entities

To be eligible to contract with the Secretary for the PCIP, an entity must either be a state or

nonprofit private organization.16 For the other 23 states and DC, HHS issued a request for

proposals for a PCIP third party administrator on May 25, 2010.17 HHS chose the Government

Employees Health Association, Inc. (GEHA), from the 14 non-profit organizations that expressed

interest in the program.18 GEHA is also currently a Federal Employee Health Benefits Program

(FEHBP) carrier.19

PPACA appropriated $5 billion to pay claims and the administrative costs of the temporary HRP

that are in excess of the amount of premiums collected from enrollees beginning on July 1 2010,

until the program ends on January 1, 2014.20 There has been some concern that the funding

amount is inadequate for the program. Richard Foster, the chief actuary of the Centers for

Medicare and Medicaid Services, estimates that by 2011 or 2012 the initial funding will be

§1101(b)(1) of PPACA. Eligible entities other than a state must be a non-profit organization.

U.S. Department of Health and Human Services, “Statement of Organization, Functions, and Delegations of

Authority,” Federal Register, Vol. 75, No. 74 , Monday, April 19, 2010.

Julie Appleby, “Appointments of federal watchdogs suggest more tough scrutiny for insurers,” Washington Post,

June 1, 2010, available at http://www.washingtonpost.com/wp-dyn/content/article/2010/05/31/

AR2010053102756.html.

76 Federal Register 4703.

CMS, “CMS Leadership, Center for Consumer Information and Insurance Oversight,” March 29, 2011, available at

http://www.cms.gov/CMSLeadership/36_Office_CCIIO.asp#TopOfPage.

§1101(b)(2) of PPACA.

U.S. Department of Health and Human Services, “Solicitation For Third Party Administrators For Federal High Risk

Pool Program,” May 25, 2010, available at https://www.fbo.gov/spg/HHS/PSC/DAM/10-233-SOL-00200/listing.html.

U.S. Department of Health and Human Services, “Initiatives and Programs: Pre-Existing Condition Insurance Plan,”

July 2010, available at http://www.hhs.gov/ociio/initiative/index.html. U.S. Department of Health and Human Services,

“Federal High Risk Pool Third Party Administrator (10-233-SOL-00200): Interested Parties List,” June 2010, available

at https://www.fbo.gov/spg/HHS/PSC/DAM/10-233-SOL-00200/listing.html.

CRS Report RS21974, Federal Employees Health Benefits Program: Available Health Insurance Options, by (name

redacted) and (name redacted).

§1101(g)(1) of PPACA.

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exhausted, “resulting in substantial premium increases to sustain the program.”21 CBO concurs

that $5 billion will not be enough to cover the costs of all applicants through 2013.22

Many of the states that elected not to participate cited the funding as their reason. For example,

Texas Governor Rick Perry in a letter to the Secretary stated that the funding is insufficient and

that “state officials could be forced to reduce health coverage, raise premiums or ask state

taxpayers to pay” for the HRP.23 Similarly, Wyoming Governor Dave Freudenthal wrote the

Secretary expressing the concern “that the allotted money may prove to be insufficient to fully

operate this program until 2014.”24 If HHS estimates that there will be a funding shortage, then

the Secretary has the authority to make any program adjustments necessary to eliminate the

deficit.25

The Secretary has proposed allocating funds for the program by using a formula similar to what

was used for the State Children’s Health Insurance Program (CHIP), whereby funds would be

allotted to states using a combination of factors, including nonelderly population, nonelderly

uninsured, and geographic cost, as a guide.26 The Secretary intends to reallocate the unspent state

allotments after a period of not more than two years, based on an assessment of enrollment and

expenditure experiences of each state. A breakdown of the proposed funding by state is provided

in Table A-2.

Eligibility Criteria

The PCIP program is intended to supplement existing state HRPs. Indeed, existing state HRP

enrollees are ineligible for the federal program because federal enrollees must be without credible

coverage for a six-month period prior to the date on which the individual is applying for coverage

through the federal PCIP program.27 Credible coverage is defined by §2701(c) of the Public

Health Service Act (PHSA) as a group health plan, health insurance coverage, Medicare Part A or

Part B, Medicaid, coverage from the Department of Defense, a medical care program of the

Indian Health Service (IHS), a state health benefits risk pool, the Federal Employee Health

Benefits Program (FEHBP), a public health plan (as defined in regulations), or a health benefit

plan under the Peace Corps Act.28 The criteria is based on enrollment in credible coverage, not on

access to it. In other words, PCIPs are permitted to deny eligibility based on an applicant’s

January 8, 2010, memorandum “Estimated Financial Effects of the Patient Protection and Affordable Care Act as

Passed by the Senate on December 24, 2009” from CMS Chief Actuary Richard S. Foster to the Congress. Available at

http://www.cms.gov/ActuarialStudies/Downloads/S_PPACA_2010-01-08.pdf.

Congressional Budget Office, “Letter to Senator Michael B. Enzi,” June 21, 2010, available at http://www.cbo.gov/

ftpdocs/115xx/doc11572/06-21-High-Risk_Insurance_Pools.pdf.

April 30, 2010, letter from Governor Rick Perry to Secretary Kathleen Sebelius. Available at

http://governor.state.tx.us/files/press-office/O-SebeliusKathleen20100430.pdf.

Leigh Anne G. Manlove, “Governor Freudenthal Opts for Federally Run High-Risk Insurance Pool,” April 28, 2010.

Available at http://governor.wy.gov/press-releases/governor-freudenthal-opts-for-federally-run-highrisk-insurancepool.html.

§1101(g)(2) of PPACA.

U.S. Department of Health and Human Services, “Fact Sheet – Temporary High Risk Pool Program,” April 2010.

Available at http://www.hhs.gov/ociio/initiative/hi_risk_pool_facts.html.

§1101(d) of PPACA.

45 CFR 146.113 defines a public health plan as any plan established or maintained by a state, the U.S. government, a

foreign country, or any political subdivision of a state, the U.S. government, or a foreign country that provides health

coverage to individuals who are enrolled in the plan.

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enrollment in creditable coverage during the six-month period prior to applying for PCIP, but they

may not deny coverage to an otherwise eligible individual merely because the individual has

access to credible coverage.29

Eligible individuals must also have a preexisting condition, as determined by the Secretary.30 In

the interim final rule published on July 30, 2010, the Secretary established the following criteria

for determining if an individual has a preexisting condition for the purposes of PCIP eligibility:

(1) the individual provides documented evidence that an insurer has refused, or has provided clear

indication that it would refuse, to issue individual coverage on grounds related to the individual’s

health; (2) the individual provides documented evidence that he or she has been offered

individual coverage but only with a rider that excludes coverage of benefits associated with a

preexisting condition; (3) the individual provides documented evidence that he or she has a

medical or health condition specified by the state and approved by the Secretary for inclusion in

PCIP; or (4) other criteria as defined by the PCIP and approved by the Secretary.31

Finally, eligible individuals must be a citizen or national of the United States or be lawfully

present in the United States.32 To assist in determining citizenship or nationality, HHS is creating

a new computer matching program with the U.S. Office of Personnel Management (OPM), the

Social Security Administration (SSA), and the Department of Agriculture’s National Finance

Center (NFC).33 This program will allow for the matching between agency systems of the

following data fields: name, address, date of birth, Social Security Number (SSN), and Tax

Identification Number (TIN).

Application Procedures and Enrollment

To apply for the PCIP administered by HHS, eligible individuals must submit an application and

supporting materials indicating their eligibility. The PCIP has both paper and online application

options available.34 Prospective applicants can also call to request a mailed copy of the

application at 1-866-717-5826 (TTY 1-866-561-1604). The application requires basic personal

information, indication of citizenship or immigration status, information about the applicant’s

medical condition or diagnosis that makes the individual eligible, and information about previous

health insurance coverage.35 PCIP applicants must also supply a copy of a letter dated within six

months of the application from an insurance company or health plan showing that they had been

completely denied individual coverage because of a preexisting condition, or were offered

coverage but were denied certain benefits because of a preexisting condition. Federal HRPs

administered by the states may develop their own application procedures, and thus some variation

U.S. Department of Health and Human Services, “Pre-Existing Condition Insurance Plan Eligibility and Access to

Other Creditable Coverage (Policy Letter #5),” March 23, 2011.

§1101(d) of PPACA.

75 Federal Register 45014-45033.

§1101(d) of PPACA.

U.S. Department of Health and Human Services, “Notice of Computer Matching Program, SSA With the United

States Department of Agriculture (USDA), National Finance Center (NFC),” Federal Register, P.40770, vol. 75, no.

134, Wednesday, July 14, 2010.

See http://www.pcip.gov/Apply.html.

U.S. Department of Health and Human Services, “Instructions for Completing Your Application for the Pre-Existing

Condition Insurance Plan,” June 2010, available at http://www.pcip.gov/

PreExistingConditionPlan_EnrollmentForm_063010_508.pdf.

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has been observed.36 Specific state contacts for applications are available at the Pre-Existing

Condition Insurance Plan website.37

The Congressional Budget Office (CBO) estimated around 200,000 individuals would be enrolled

on average over the 2011-2013 period, based on the assumption that HHS will only spend the $5

billion appropriated in PPACA.38 However, CBO expects that if the program spending were not

capped and 65% of medical costs were covered, then federal spending through 2013 would be

between $10 billion and $15 billion and enrollment would be expected to grow from

approximately 400,000 in 2011 to as high as 700,000 in 2013.39 As of the enrollment figures

released on February 1, 2011, 12,437 individuals have enrolled in PCIPs (see Table 1 for PCIP

enrollment by state).

The reasons for the lower than expected enrollment have not been independently researched yet.

Nevertheless, CCIIO explained in the CMS FY2012 budget justification submission that in the

initial months of the program, efforts were focused on establishing the program within the 90-day

time period required by PPACA and this compressed implementation schedule necessitated focus

on operational matters (e.g., developing claims adjudication, enrollment, and premium collection

systems) rather than devoting substantive effort on an education campaign.40 CCIIO is now

working on public education efforts. In testimony before the House Committee on Energy and

Commerce, Subcommittee on Oversight and Investigations, CCIIO Director Steven Larsen stated

that

CCIIO has an aggressive strategy to encourage enrollment of eligible individuals, meeting

with local doctors, hospitals, consumer groups and chapters of advocacy groups like the

American Cancer Society and American Diabetes Association. For example, we are working

to reach local stakeholders and providers who come into contact with people with chronic

care needs in need of insurance to spread awareness about the PCIP program. We have

actively reached out to provider groups through webinars, arranged meetings with potential

partners in at least six States, and will continue this outreach in the coming months. CMS is

also working with agencies that have a history serving individuals with disabilities, such as

the Social Security Administration. Since February 15, 2011, all applicants for Social

Security disability benefits have been informed about the PCIP program through application

receipts. These collaborations leverage existing communication channels with individuals

who have a pre-existing condition and may therefore be eligible for the PCIP program.41

On May 31, 2011, HHS announced that the eligibility standards will be eased to facilitate

enrollment in the states where the PCIPC are federally administered.42 Starting July 1, 2011,

applicants may merely provide a letter from a doctor, physician assistant, or nurse practitioner

State contact information is available at http://www.pcip.gov/StatePlans.html.

U.S. Department of Health and Human Services, “Pre-Existing Condition Insurance Plan State Information,”

available at http://www.pcip.gov/StatePlans.html.

Congressional Budget Office, “Letter to Senator Michael B. Enzi,” June 21, 2010, available at http://www.cbo.gov/

ftpdocs/115xx/doc11572/06-21-High-Risk_Insurance_Pools.pdf.

Ibid.

Centers for Medicare & Medicaid Services, “FY 2012 Online Performance Appendix,” February 2011.

Testimony of OCIIO Director Steven Larsen, in U.S. Congress, House Committee on Energy and Commerce,

Subcommittee on Oversight and Investigations, “The PPACA’s High Risk Pool Regime: High Cost, Low

Participation,” 112th Congress, 1st session, April 1, 2011.

U.S. Department of Health and Human Services, “Changes to the Pre-Existing Condition Insurance Plan in Your

State,” May 31, 2011, available at http://www.healthcare.gov/news/factsheets/pcip05312011a.html.

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dated within the past 12 months stating that they have or, at any time in the past, had a medical

condition, disability, or illness. Applicants will no longer have to wait on an insurance company

to send them a denial letter.43

Table 1. PCIP Enrollment by State

November 1, 2010 through April 30, 2011

State

Date Coverage

Began

(in 2010)

11/1/2010

Enrollment

2/1/2011

Enrollment

3/31/2011

Enrollment

4/30/2011

Enrollment

Alabama

August 1

Alaska

September 1

Arizona

August 1

112

270

374

457

Arkansas

September 1

127

147

198

226

California

October 25

513

706

1,543

1,858

Colorado

September 1

368

434

617

699

Connecticut

September 1

Delaware

August 1

October 1

Florida

August 1

293

613

770

925

Georgia

August 1

161

399

515

608

Hawaii

August 1

Idaho

August 1

Illinois

September 1

664

943

1,150

1,261

Indiana

August 1

131

177

201

Iowa

September 1

129

143

Kansas

August 1

112

161

177

Kentucky

August 1

Louisiana

August 1

121

137

Maine

August 1

Maryland

September 1

145

298

348

Massachusetts

August 1

Michigan

October 1

184

225

Minnesota

August 1

Mississippi

August 1

Missouri

August 15

101

166

289

322

Montana

August 1

149

153

198

214

Nebraska

August 1

Nevada

August 1

125

147

181

Applicants will still need to meet other eligibility criteria, including that they are U.S. citizens or residing in the

United States legally and that they have been without health coverage for six months.

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State

Date Coverage

Began

(in 2010)

11/1/2010

Enrollment

2/1/2011

Enrollment

3/31/2011

Enrollment

4/30/2011

Enrollment

New Hampshire

July 1

123

148

New Jersey

August 15

108

216

416

507

New Mexico

August 1

133

198

322

354

New York

October 1

201

411

847

1,075

North Carolina

August 1

513

674

1,106

1,302

North Dakota

August 1

Ohio

September 1

634

726

1,024

1,145

Oklahoma

September 1

148

190

262

291

Oregon

August 1

340

483

734

822

Pennsylvania

October 1

1,657

2,046

2,684

3,191

Rhode Island

September 15

102

115

South Carolina

August 1

104

242

309

377

South Dakota

July 15

Tennessee

August 1

171

255

314

Texas

August 1

393

1,007

1,298

1,528

Utah

September 1

117

223

286

Vermont

September 1

Virginia

August 1

204

268

320

Washington

September 1

139

304

341

West Virginia

September 1

Wisconsin

August 1

248

307

456

547

Wyoming

August 1

Totals

7,986

12,437

18,313

21,454

Sources: U.S. Department of Health and Human Services, “State by State Enrollment in the Pre-Existing

Condition Insurance Plan, Archived Enrollment Data,” November 1, 2010, available at http://www.healthcare.gov/

news/factsheets/pcip02102011b.html; U.S. Department of Health and Human Services, State by State Enrollment

in the Pre-Existing Condition Insurance Plan,” February 1, 2011, available at http://www.healthcare.gov/news/

factsheets/pcip02102011a.html; and U.S. Department of Health and Human Services, “State by State Enrollment

in the Pre-Existing Condition Insurance Plan,” April 30, 2011, available at http://www.healthcare.gov/news/

factsheets/pcip06102011a.html.

Notes: Maine, Massachusetts, New Jersey, New York, and Vermont all have laws that in varying ways guarantee

issue of health insurance and prohibit insurers from denying a person coverage based upon preexisting

conditions. Residents of these states will therefore not have letters of denial or riders from insurers to use in

the PCIP eligibility. The federal “proof of denial” requirements (for Vermont and Massachusetts) were modified

to accept documentation that shows the individual was offered coverage in the last six months at a premium at

least twice as much as the PCIP premium in the state. In Maine and New York, eligibility for the stateadministered PCIP is restricted to individuals with certain health conditions that are included in a list of 30

selected conditions. In New Jersey, insurers cannot deny coverage because of a preexisting condition, but can

impose an exclusion period for treatment of the preexisting condition. A person is eligible for the New Jersey

PCIP if he or she has a condition that a carrier would have temporarily excluded from coverage.

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Plan Benefits and Premium Rates

Specific coverage policy (e.g., providers and procedures covered and prescription drug

formularies) is not addressed by the law. In other words, section 1101 PPACA does not require

nor expressly prohibit certain providers, procedures, prescriptions drugs, or medical technology.

However, the Secretary does have the authority to establish additional requirements for the

program that can be used to establish coverage policy.44 With respect to network adequacy, the

Secretary established by regulation that each PCIP may specify the network of providers it

contracts with, but the PCIP must demonstrate to HHS that it has a sufficient number and range of

providers to ensure that all covered services are reasonably available to enrollees.45 The Secretary

further established that PCIPs must cover certain benefit categories listed below.46 Specific

covered items and services within these broad coverage categories may vary between PCIPs. The

Secretary also established the following excluded coverage categories: (1) cosmetic surgery

except to restore bodily function or correct deformity resulting from disease; (2) custodial care

except for hospice; (3) in vitro fertilization, artificial insemination or any other artificial means

used to cause pregnancy; (4) abortion services except when the life of the woman would be

endangered or when the pregnancy is the result of an act of rape or incest; and (5) experimental

care except as part of an FDA-approved clinical trial.47

Required PCIP Benefit Categories at 45 CFR §152.19(a)

•

Hospital inpatient services

•

Diagnostic x-rays and laboratory tests

•

Hospital outpatient services

•

Physical therapy services

•

Mental health and substance abuse services

•

Hospice services

•

Professional services for the diagnosis or

treatment of injury, illness, or condition

•

Emergency services including ambulance

services

•

Non-custodial skilled nursing services

•

Prescription drugs

•

Home health services

•

Preventive care

•

Durable medical equipment and supplies

•

Maternity care

PPACA also establishes certain benefits requirements with respect to the value of the PCIP

coverage. To be a qualified PCIP, the health insurance coverage must have an actuarial value of at

least 65% of the total allowed costs.48 The means that the PCIP’s average share of the total the

costs of the coverage benefits must be at least 65%. The coverage must also have an out-ofpocket limit no greater than the applicable amount for high-deductible health plans linked to

health savings accounts, which is $5,950 for an individual in 2011.49 This means the total annual

§1101(c)(2)(D) of PPACA.

45 CFR §152.22.

45 CFR §152.19(a).

45 CFR §152.19(b).

§1101(c)(2)(B) of PPACA. The actuarial value of a health insurance policy is the percentage of the total covered

expenses that the plan would, on average, cover. For example, a plan with a 65% actuarial value means that consumers

would on average pay 35% of the cost of health care expenses through features like deductibles and coinsurance. The

amount that individual consumers pay could vary substantially by the amount of services used. The actuarial value does

not include premiums paid by the enrollee.

§1101(c)(2)(B) of PPACA and §223(c)(2) of the Internal Revenue Code of 1986.

Congressional Research Service

Temporary Federal High Risk Health Insurance Pool Program

cost-sharing requirements, including deductibles, cannot exceed $5,950. This limit, however, does

not apply to deductibles and expenses for out-of-network services if the plan uses a network of

providers.50 There is considerable variation in cost sharing between states and PCIP options

within a state. For 2011, PCIP medical deductibles range from $0 to $5,000 and for PCIPs with

separate drug deductibles the range is $100 to $500.51 After the deductible, some PCIPs have a

coinsurance requirement while other PCIPs use flat dollar co-payments. For example, PCIPs that

utilize coinsurance typically require around 20% for a primary care visit, while the flat dollar copayments for the same visit in other PCIPs is typically around $20 to $25.52

Certain PPACA requirements for the PCIP are designed to make premium rates fair and

affordable. By law, premium rates for the PCIP must be established at a standard rate for a

standard population and age rating cannot exceed a factor of 4 to 1.53 PPACA also subsidizes

premiums by appropriating $5 billion for the payment of claims and administrative costs of the

PCIP that are in excess of the amount of premiums collected from enrollees.54 In addition to the

population and age rating factors, PCIP premiums vary considerably by state and by plan benefit

factors, such as, the size of the deductible.55 For 2011, monthly premiums for PCIPs

administrated by a state range from $69 to $1,806 and for the federal PCIPs premiums range from

$116 to $842.56

Reducing 2011 Premiums

In order to reduce the out-of-pocket premium costs that may have been high enough to discourage

enrolling in the PCIPs, HHS announced on May 31, 2011, that it would be reducing premiums in

the federally administered PCIPs.57 Effective July 2011, premiums will drop an average of

20.67%.58 These premium decreases help bring PCIP premiums closer to the rates in each state’s

individual insurance market (Table 2). In Hawaii, Idaho, Massachusetts, North Dakota, Vermont,

and Wyoming, PCIP premiums were similar to the individual market and will not be reduced.

Department of the Treasury, Internal Revenue Service, “Health Savings Accounts and Other Tax-Favored Health

Plans,” Publication 969, November 25, 2009.

Richard Popper, “Immediate Improvements in the Insurance Market for Americans over 50 The Early Retiree

Reinsurance Program and the Pre-existing Condition Insurance Plan,” presentation before the Alliance for Health

Reform, January 24, 2011.

CRS analysis of PCIP benefit packages.

§1101(c)(2)(C) of PPACA. The terms “standard rate” and “standard population” were not defined by PPACA. HHS

has interpreted this provisions to mean that the rate may not exceed 100% of the standard non-group rate. U.S.

Department of Health and Human Services, “Fact Sheet—Temporary High Risk Pool Program,” April 2010. Available

at http://www.hhs.gov/ociio/initiative/hi_risk_pool_facts.html. Age rating refers to the practice of a health insurer

estimating the expected health care spending for all individuals within a given age group and then varying the

premiums for individuals across groups to account for the differences. Higher age groups are charged higher premiums.

§1101(g) of PPACA.

For a background in factors that impact on premium rates, see CRS Report R41588, Private Health Insurance

Premiums and Rate Reviews, by (name redacted) and (name redacted).

Richard Popper, “Immediate Improvements in the Insurance Market for Americans over 50 The Early Retiree

Reinsurance Program and the Pre-existing Condition Insurance Plan,” presentation before the Alliance for Health

Reform, January 24, 2011.

U.S. Department of Health and Human Services, “HHS to Reduce Premiums, Make it Easier for Americans with PreExisting Conditions to Get Health Insurance,” May 31, 2011, available at http://www.hhs.gov/news/press/2011pres/05/

20110531b.html.

U.S. Department of Health and Human Services, “Changes to the Pre-Existing Condition Insurance Plan in Your

State,” May 31, 2011, available at http://www.healthcare.gov/news/factsheets/pcip05312011a.html.

Congressional Research Service

Temporary Federal High Risk Health Insurance Pool Program

HHS concurrently released guidance to the states on how they may reduce premiums in the stateadministered PCIPs.59 To date, it is unknown how many states plan on adjusting premiums in

their PCIPs.

Table 2. July 2011 Reductions in Federally Administered PCIP Premiums

State

PCIP Premium Reduction

Alabama

-40.0%

Arizona

-40.0%

Delaware

-40.0%

District of Columbia

-18.3%

Florida

-40.0%

Georgia

-15.5%

Hawaii

No Change

Idaho

No Change

Indiana

-26.2%

Kentucky

-40.0%

Louisiana

-24.8%

Massachusetts

No Change

Minnesota

-38.3%

Mississippi

-2.1%

Nebraska

-20.5%

Nevada

-37.5%

North Dakota

No Change

South Carolina

-14.7%

Tennessee

-18.4%

Texas

-23.6%

Vermont

No Change

Virginia

-40.3%

West Virginia

-15.8%

Wyoming

No Change

Source: U.S. Department of Health and Human Services, “Changes to the Pre-Existing Condition Insurance Plan

in Your State,” May 31, 2011, available at http://www.healthcare.gov/news/factsheets/pcip05312011a.html.

U.S. Department of Health and Human Services, “PCIP Premium and Benefit Revisions (Policy Letter #6),” May 31,

2011.

Congressional Research Service

Temporary Federal High Risk Health Insurance Pool Program

Appendix. PCIP Program Tables

Table A-1. PCIP Websites by State

State

Name

Website

Alaska

Alaska Comprehensive

Health Association

http://www.achia.com/ACHIA-FED/benefits.htm

Arkansas

Federal Pre-Existing

Condition Insurance Plan

(PCIP)

http://www.chiparkansas.org/pcip/default.asp

California

California Pre-Existing

Condition Insurance Plan

(PCIP)

http://www.pcip.ca.gov/Home/default.aspx

Colorado

Getting US Covered

https://www.gettinguscovered.org/

Connecticut

Connecticut Pre-Existing

Condition Insurance Plan

http://www.ct.gov/dss/cwp/view.asp?Q=463668&A=2345

Illinois

Illinois Pre-Existing

Condition Insurance Plan

(IPXP)

http://insurance.illinois.gov/IPXP/

Iowa

Iowa Comprehensive

Health Association

(HIPIOWA)

http://www.hipiowa.com/

Kansas

Pre-existing Condition

Insurance Plan-Kansas

(PCIP-KS)

http://www.khiastatepool.com/default.asp

Maine

Pre-Existing Condition

Plan

http://www.dirigohealth.maine.gov/Pages/pre_exist.html

Maryland

Maryland Health

Insurance Plan (MHIP)

http://www.marylandhealthinsuranceplan.state.md.us/

Michigan

Health Insurance Program

(HIP) Michigan

http://www.hipmichigan.com/

Missouri

Missouri Health Insurance

Pool (MHIP)

http://www.mhip.org/

Montana

Montana Affordable Care

Plan (MAC Plan)

http://www.mthealth.org/

New Hampshire

NHHP-FED

http://www.nhhp.org/nhhp-fed/index.asp

New Jersey

NJ Protect

http://www.state.nj.us/dobi/division_insurance/njprotect/index.htm

New Mexico

New Mexico Federal High

Risk Pool (FHRP)

http://www.nmmip.org/

New York

NY Bridge Plan

http://www.ins.state.ny.us/health/high_risk.htm

North Carolina

Inclusive Health - Federal

Option

http://www.inclusivehealth.org/federaloption/index.htm

Ohio

Ohio High Risk Pool

http://www.ohiohighriskpool.com/

Oklahoma

Oklahoma Temporary

High Risk Pool

http://www.bcbsok.com/ohrp/temp_pool.html

Congressional Research Service

Temporary Federal High Risk Health Insurance Pool Program

State

Name

Website

Oregon

Oregon Federal Medical

Insurance Pool (FMIP)

http://www.oregon.gov/OPHP/OMIP/fmip.shtml

Pennsylvania

PA Fair Care

http://www.pafaircare.com/

Rhode Island

Pre-existing Condition

Insurance Plan for Rhode

Island (PCIPRI)

https://www.bcbsri.com/BCBSRIWeb/plansandservices/PECIPRI/index.jsp

South Dakota

South Dakota Federal

High Risk Pool Program

http://fedhighriskpool.sd.gov/

Utah

Federal-HIPUtah

http://selecthealth.org/plans/government/fedhip/Pages/home.aspx

Washington

Pre-existing Condition

Insurance PlanWashington State (PCIPWA)

https://www.wship.org/PCIP-WA/default.htm

Wisconsin

Federal Health Insurance

Risk-Sharing Plan (HIRSP)

http://www.hirsp.org/index.shtml

Federally

administered PCIP

states

Pre-Existing Condition

Insurance Plan

http://www.pciplan.com

Source: CRS analysis.

Note: The federally administered PCIP states are Alabama, Arizona, Delaware, DC, Florida, Georgia, Hawaii, Idaho,

Indiana, Kentucky, Louisiana, Massachusetts, Minnesota, Mississippi, Nebraska, Nevada, North Dakota, South

Carolina, Tennessee, Texas, Vermont, Virginia, West Virginia, and Wyoming.

Congressional Research Service

Temporary Federal High Risk Health Insurance Pool Program

Table A-2. Proposed Allocation of Federal Funds for

Temporary High Risk Pools, by State

State

Potential Allocation of

Federal HRP Funds

(in millions)

Alabama

$69

Alaska

$13

Arizona

$129

Arkansas

$46

California

$761

Colorado

$90

Connecticut

$50

Delaware

$13

District of Columbia

Florida

$351

Georgia

$177

Hawaii

$16

Idaho

$24

Illinois

$196

Indiana

$93

Iowa

$35

Kansas

$36

Kentucky

$63

Louisiana

$71

Maine

$17

Maryland

$85

Massachusetts

$77

Michigan

$141

Minnesota

$68

Mississippi

$47

Missouri

$81

Montana

$16

Nebraska

$23

Nevada

$61

New Hampshire

$20

New Jersey

$141

New Mexico

$37

New York

$297

North Carolina

$145

Congressional Research Service

Temporary Federal High Risk Health Insurance Pool Program

State

Potential Allocation of

Federal HRP Funds

(in millions)

North Dakota

Ohio

$152

Oklahoma

$60

Oregon

$66

Pennsylvania

$160

Rhode Island

$13

South Carolina

$74

South Dakota

$11

Tennessee

$97

Texas

$493

Utah

$40

Vermont

Virginia

$113

Washington

$102

West Virginia

$27

Wisconsin

$73

Wyoming

Totals

$5 billion

Sources: U.S. Department of Health and Human Services, “HHS Secretary Sebelius Announces New

Pre-Existing Condition Insurance Plan,” July 1, 2010, available at http://www.hhs.gov/news/press/2010pres/07/

20100701a.html; U.S. Department of Health and Human Services, “Fact Sheet – Temporary HRP Program,” April

2010. Available at http://www.hhs.gov/ociio/initiative/hi_risk_pool_facts.html.

Author Contact Information

(name redacted)

Specialist in Health Care Financing

#redacted#@crs.loc.gov, 7-....

Acknowledgments

The author wishes to thank (name redacted), a former Specialist in Health Care Financing, for drafting this

report.

Congressional Research Service

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