The Obama Administration Keeps Extending a Conservative Health-Care Reform

by Patrick Brennan

Sort of. The administration announced last night that it’s extending the temporary federally run high-risk pool (“PCIP”) created by the Affordable Care Act for another 90 days, providing coverage until March 15. Federally subsidized insurance programs for people with preexisting conditions aren’t, of course, the most conservative idea on earth, but they’ve actually been a part of GOP health-care thinking for a long time. They offer reasonably priced, subsidized coverage for people whom insurers refuse — those with pre-existing conditions and especially expensive health needs — on the theory that pooling even high-risk individuals can help save money (they don’t all need treatment at the same time).

Obamacare has a more invasive way of ensuring those expensive people can get coverage: It prevents insurers from considering health status at all, a policy called “guaranteed issue” that dramatically drives up rates — that is, it tears up the entire insurance market and making it more expensive for almost everyone in order to make it cheaper and more accessible for a very small number of people. The problem: The Obamacare approach hasn’t gone very well so far.

Since Obamacare meant that sick people would no longer be denied coverage, states ended their high-risk pools at the end of December 2013. But the disastrous rollout of the law means that some people who used to rely on risk pools in the more than 30 states that had them (both red and blue) haven’t been able to obtain coverage starting January 1 — so the Obama administration announced in December it was extending coverage from the program, PCIP, through the end of January. Now it’s extended that program through the middle of March, hoping that the people covered by PCIP can and will get coverage by then.

There aren’t a huge number of PCIP enrollees still trying to get coverage: HHS says just 30,000 people are still enrolled in the program. But that’s a fairly large share of the number of people who were once enrolled in state high-risk pools, which were never very big. Moreover, the demand for the federal one overwhelmed the funding for it: It enrolled 135,000 people before running out of funding and closing enrollment in mid February 2013, meaning that this transitional program was unavailable for the thousands of people who tried to apply after that date (because, say, they lost a job that guaranteed coverage, or developed a pre-existing condition). This past spring, House majority leader Eric Cantor proposed moving billions from an Obamacare slush fund into funding PCIP so it could keep enrolling people. This ignited a fierce intra-GOP debate, and the legislation ultimately didn’t get to a vote — the Obama administration also opposed it fiercely, and claimed the funds it appropriated were necessary for Obamacare implementation. Where they’re getting the funds to run PCIP for the next two months, I have no idea.

The existing state high-risk pools, even if there were one in every state, were inadequate: States usually don’t have the resources to make them generous enough to provide an actual backstop of coverage for everyone who needs it, which is why there probably needs to be some federal involvement. Many will object that there isn’t enthusiasm in the GOP for spending federal money on funding such a project — there is, of course, some truth to this (despite Cantor’s support for this program). But if and when the GOP provides a serious alternative to Obamacare, it’ll include high-risk pools, and that’s just one of the ways in which it can be a simpler and leaner program than Obamacare. Rather than attempt to attract all Americans to an overpriced insurance market in the hopes of lowering premiums for the very sick, it would accept that people don’t have a right to health care at the same price as everyone else, meaning the very sick have to pay more (but thanks to federal subsidies​, not so much more as to render it unaffordable). The approach will allow most people to purchase much cheaper insurance while ensuring that the very sick can get health insurance (as some of them indeed cannot right now). Obamacare’s failure to do what it’s promised so far — attract young and healthy people to subsidize the old, and create risk pools of universal coverage — is just an indication that the conservative approach may have been the better one all along.

While it makes sense to extend this program to ensure people can maintain coverage, it does present at least one problem: People don’t have any great reason to stay in PCIP rather than move to the exchanges (except, of course, that it’s still hard to enroll in the latter), but if they do stay through February or March, insurers won’t know until later in the year the full story about who’s enrolled and, especially, how many really expensive enrollees they got and how much it costs to pay for those people’s health care. Why is this a problem? Because open enrollment for 2015 begins in October, and insurers need to start calculating and setting rates months before that. If they don’t have a handle on claims costs by the time they’re doing that, they’re going to have a harder time setting accurate rates for the next year, which is problematic for everyone involved.