Protecting America's sick and chronically ill

hospital by

Article Highlights

  • As many as 4 million Americans could be covered by more generously funded high-risk pools

    Tweet This

  • Pre-existing condition insurance plans represented a poorly designed, half-hearted gesture within the ACA

    Tweet This

  • Instead, we should commit a series of capped annual appropriations to support continued operations of state HRPs

    Tweet This


Click here to watch the full hearing on C-SPAN

Opening Statement

Thank you Chairman Pitts, Vice Chairman Burgess, and members of the Subcommittee for the opportunity to speak this morning on protecting America’s sick and chronically ill.

Pre-existing condition insurance plans (PCIPs) represented a poorly designed, half-hearted gesture within the Affordable Care Act (ACA), aimed primarily at minimizing political risks rather than addressing a serious problem more immediately and comprehensively. PCIP coverage served more as a cosmetic patch to cover the consequences of slow implementation of complex coverage provisions scheduled to begin nearly four years after enactment of the ACA.

            The program never received sufficient funding to do its job seriously. That indicates where it stands in the relative level of priorities for the drafters of the law. The relatively small amount of funding and limited attention to the program’s structural details appear to conflict with the exaggerated rhetoric of the Obama administration in claiming that the extensive problems of lack of coverage for tens of  millions of Americans with pre-existing  health conditions were the primary political rationale for enacting the ACA’s regulatory, coverage, and financing provisions. .

The political ideology behind the core policies of the ACA (installing guaranteed issue, community rating, mandated coverage, richer standard benefits, and federal regulation of health insurance) trumped targeting the smaller, but significant, problem of several million Americans with limited or no insurance coverage due to serious pre-existing health conditions and addressing it more effectively. 

            The PCIP program managed to solve less of the problem (enrolling fewer individuals), at a higher per-person cost, while still running out of money. Not bad for government work! At the same time, it discouraged continuation beyond 2013 of better, tested, state alternative mechanisms (better-funded high-risk pools).

            By setting its premiums for all at no more than standard rates --- contrary to better practices of older state high-risk pools (HRPs) which charge more, and also imposing a “6-month spell as uninsured” to qualify for coverage, PCIP only succeeded in mostly enrolling very desperate, high-cost individuals who had no other alternatives for coverage.

    States administering pre-ACA HRPs did a better job by charging enrollees somewhat higher premiums, offering less comprehensive coverage, and focusing on those individuals who presented the most serious and costly medical  conditions. However, they, too, still need more robust sources of funding to do their job more thoroughly and effectively.

            Simply trying to average (and hide) the same total health care claims costs across a somewhat wider base (the ACA approach) may redistribute them, but it does not reduce them.

If the forthcoming health exchanges are plagued by premium spikes, implementation misfires, limited enrollment, and adverse selection, they may more closely resemble somewhat larger versions of state-level PCIPs than more competitive alternatives to the current private insurance market.

Policymakers should consider the following:

    • Recognize that health care markets are local, not national. So too are problems for persons with high-cost conditions.
    • The rhetoric of delegating administration of sensitive health policy provisions to state governments needs to be matched by the reality of federal officials letting go of tight reins and trusting state officials with more discretion over eligibility, benefits, and appeals issues, within much broader outcome-oriented federal parameters.
    • Be very cautious about imprecise estimates (guesses) regarding the scale, scope, and costs of the medically uninsurable and others with inadequate resources to handle very high-cost/high-risk health conditions.
    • Commit a generous amount of a series of capped annual appropriations to support continued operations of state HRPs  and/or restructured  PCIPs, to be revisited upon subsequent evidence of larger enrollment demand or higher (but medically necessary) costs. Avoid early commitments to open-ended entitlement formulas
    • Publicly subsidizing the high-cost “tail” of health risks can strengthen the rest of the insurance market. 
    • Raise unsubsidized premiums charged for most enrollees in high-risk pool plans (to at least 150 percent of standard rates), but then provide income-based subsidies for lower-income persons. Separate the issue of income support from that of protection against losing or lacking coverage solely due to elevated personal health risk.
    • Complementary policy reforms can help (establish better portability from group to individual market with creditable coverage, don’t require exhaustion of COBRA benefits, retarget premium subsidies, build information transparency mechanisms that reward better patient choices and provider practices)
    • Keep as many older state HRPs as possible in business post-2013, as an “insurance” policy against major problems in exchange implementation and individual mandate enforcement/compliance. Allow such coverage to be considered “qualified insurance” under ACA to minimize post-2013 disruptions in the continuity of coverage and care.
    • If the overall costs of health care don’t rise more slowly, and individual incomes don’t rise more rapidly, in the near future, no amount of subsidized insurance tinkering can keep up with a larger problem.
    • Remember that the pre-existing condition issue is still a largely limited, modest problem. Solve it, instead of using it as a political excuse to hijack the REST of the private insurance market.

Thank you. I look forward to your questions.


Also Visit
AEIdeas Blog The American Magazine
About the Author


Thomas P.

What's new on AEI

AEI Election Watch 2014: What will happen and why it matters
image A nation divided by marriage
image Teaching reform
image Socialist party pushing $20 minimum wage defends $13-an-hour job listing
AEI on Facebook
Events Calendar
  • 20
  • 21
  • 22
  • 23
  • 24
Monday, October 20, 2014 | 2:00 p.m. – 3:30 p.m.
Warfare beneath the waves: The undersea domain in Asia

We welcome you to join us for a panel discussion of the undersea military competition occurring in Asia and what it means for the United States and its allies.

Tuesday, October 21, 2014 | 8:30 a.m. – 10:00 a.m.
AEI Election Watch 2014: What will happen and why it matters

AEI’s Election Watch is back! Please join us for two sessions of the longest-running election program in Washington, DC. 

Wednesday, October 22, 2014 | 1:00 p.m. – 2:30 p.m.
What now for the Common Core?

We welcome you to join us at AEI for a discussion of what’s next for the Common Core.

Event Registration is Closed
Thursday, October 23, 2014 | 10:00 a.m. – 11:00 a.m.
Brazil’s presidential election: Real challenges, real choices

Please join AEI for a discussion examining each candidate’s platform and prospects for victory and the impact that a possible shift toward free-market policies in Brazil might have on South America as a whole.

Event Registration is Closed
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.