PCIP Healthcare Reform Program for Pre-Existing Conditions Shuts Down

The Pre-Existing Condition Insurance Program, created by the Obama healthcare reform law, is shutting its doors to new applicants because of the rising costs of insuring people with pre-existing conditions.

The financial costs of covering people with pre-existing conditions is sapping the funds provided by Congress to the Pre-Existing Condition Insurance Plan (PCIP), a program created under the Obama administration's healthcare reform law. As a result, the PCIP is closing its doors to new applicants, although officials contend that current enrollees will still have coverage.

Citing financial concerns, the Obama administration has begun quietly winding down one of the earliest programs created by the president's health care overhaul, a plan that helps people with existing medical problems who can't get private insurance.[1]

According to an article from Reuters, the U.S. Department of Health and Human Services suspended new enrollments in PCIP, which is currently operating in twenty-three (23) states and the District of Columbia, in order to "ensure that funds are available through 2013 to continuously cover people currently enrolled in PCIP."

The news underscores the financial costs involved in covering people with pre-existing conditions, including many with costly chronic diseases, as the $2.8 trillion U.S. healthcare industry prepares for sweeping reforms that analysts say could bring higher health insurance costs.[2]

Although PCIP charges its enrollees a premium for insurance coverage, that premium is insufficient to fund the medical and administration expenses associated with providing health insurance coverage for the enrolled patients with pre-existing conditions.

The plan covers people who have had problems getting private insurance because of a medical condition and have been uninsured for at least six months. Premiums are keyed to average rates charged in each state, which means they're not necessarily cheap, often amounting to several hundred dollars a month for middle-aged individuals.[3]

The Obama administration's healthcare reform initiatives, including the Patient Protection and Affordable Care Act, provided $5 billion to cover the costs of providing health insurance coverage that exceed the premiums charged by PCIP.

PCIP was established in 2010 under President Barack Obama's healthcare reform law to provide coverage for sick people unable to find it in the private insurance market. The program is designed as a bridge to January 1, 2014, when legal restrictions barring discrimination over medical conditions come into force.[4]

According to Reuters, PCIP has about 100,000 current enrollees that will not be affected by the announcement, "which follows more than two years of escalating enrollments and outlays." The article also indicated that twenty-seven (27) state-run PCIPs will suspend new enrollments after March 2, 2013.

PCIP is closing to new applicants to ensure it doesn't run out of money before the year-end.

The HHS official responsible for overseeing implementation of the Obamacare reforms, Gary Cohen, made it clear to the Senate Finance Committee that the alteration to the PCIP program was necessary in order to avoid running out of money before the end of the year, according to Reuters.[5]An Associated Press article indicates that PCIP was designed to be "a stopgap solution" until Obamacare's "full consumer protections" go into effect in 2014.[6]

Starting next January 1, insurance companies will no longer be able to turn anyone away because of poor health. At the same time, the federal government will begin subsidizing coverage for millions of individuals who have no access to employer plans.[7]