Does The PCIP Enrollment Problem Signal the End of Private Insurance?

There are 4 million or more Americans who can’t get regular insurance because of a pre-existing condition.  You might be one of them.  Now there’s a policy that costs less than $300 per month and covers all of your medical needs, including your pre-existing condition. 

Will you buy it?  Apparently not.

And that may signal the beginning of the end of private insurance in America.

I first wrote about the diminished role of private insurance in a column last month entitled America’s Health Insurance Myth.  Privately-financed private health insurance today pays only 17% of America’s health care bill.

Two recent developments suggest that this share will become even smaller in the future.

The first was last week’s death of the CLASS Act.  As a result, long term care will continue to be an out-of-pocket and government expense only for nearly everyone.

The second was the report of first-year enrollment numbers for the new Pre-existing Condition Insurance Plan (PCIP).  PCIP was created as part of the Affordable Care Act.  It offers low-cost health insurance for adults who have – or have had – conditions like mental illness, cancer, diabetes, and heart disease.  (Children are now covered on their parents’ policies.)

PCIP is comprehensive.  It covers hospitals, doctors, and drugs. 

There is no means test to qualify.  Provided that you have been uninsured for at least six months, all you need to apply is a note from a physician attesting to your chronic condition.

PCIP is inexpensive.  In Florida, the monthly PCIP premium for a forty-year old is only $211 for the standard option.  There are deductibles and co-pays, but annual out-of-pocket costs are capped at $5,950.  This may seem like a lot, but it is less than 20% of the 2009 average charge of $30,655 for a single hospital stay.

The federal government operates Florida’s plan and those of 22 other states.  Connecticut, on the other hand, is one of 27 states that choose to run their own programs.  In Connecticut, PCIP insurance costs $381 per month, but out-of-pocket costs are capped at $4,250 per year.  So its overall costs are similar to Florida’s.

Of an estimated 4 million people eligible for PCIP and 375,000 expected to sign up in the first year, only 30,395 bought policies.  Just 1,454 people enrolled in Florida, and only 62 enrolled in Connecticut.

Why so few?

The answer is obvious in states like Massachusetts, which has only one PCIP enrollee, and Vermont, which has none.  They have near universal coverage, so they don’t need PCIP.

What about states without universal coverage?  Pennsylvania had the highest first-year enrollment.  It had 3,762 people insured through PCIP.  If every state were like Pennsylvania, then PCIP would have around 100,000 enrollees today, still far below the expected number.

There are three explanations for why people aren’t enrolling in PCIP that speak to how little faith we have in insurance.

The first is that they believe that when there’s a crisis, hospitals and doctors will treat them whether or not they are insured.  Health care providers rarely turn their backs on people in need.

But someone still has to pay the bill.  And it usually gets paid through hidden charges in everyone else’s insurance premiums. 

The second is that people don’t think they can afford even $211 per month for health insurance, or up to $5,950 in medical bills in a year. 

But when the costs of common chronic diseases routinely run into six figures, the alternative can be bankrupting.

The third is that we don’t trust insurance.  Insurance companies take our money, fight with us about covering our bills, and make huge profits. 

But PCIP isn’t like that.  Unlike other insurance, it is designed to pay out far more money than it takes in.  PCIPs paid out four times in benefits what they charged in premiums during the first few months of the program, and Congress set aside $5 billion – of which only a fraction was spent – for this.

Here’s the bottom line.  If $211 a month is too much to pay for insurance we are sure we will use, then health insurance is dying in America.  Many of us say we will rely on our own resources, but also expect a government safety net to be there when our resources fall short.

If we roll the dice and don’t buy PCIP when we can, then we may lose more than we think.  There are political leaders who are already celebrating the demise of the CLASS Act.  Many also would happily repeal both PCIP and the Affordable Care Act, and replace them with… well, nothing.

For more information about federal and state PCIP, visit https://www.pcip.gov/.  If you have questions about this column or wish to receive an email notifying you when new Our Health Policy Matters columns are published, contact gionfriddopaul@gmail.com.