Implementing the Affordable Care Act’s new health insurance marketplaces—formerly known as insurance exchanges—presents challenges as well as opportunities for states. As they move forward with this process, policymakers and administrators can learn from the example of another state-based insurance program, the Pre-Existing Condition Insurance Plan (PCIP).
The PCIP, which was created under the health reform law and opened for enrollment in July 2010, is a temporary insurance program for people with preexisting conditions, many of whom are turned down when they seek private coverage or are offered unaffordable premiums. The PCIP is meant to serve as a “bridge”—helping provide coverage for sick people until 2014, when they will be able to find insurance through the marketplaces, which are required to offer coverage to all. (Starting in 2014, insurers operating both inside and outside of the marketplaces will be banned from restricting coverage or basing premiums on health status or gender.) As of October 2012, nearly 95,000 people were covered through the PCIP.
As with the insurance marketplaces, states had the option to administer a PCIP or have the federal government do so for them. Currently 27 states administer their own PCIP, while the federal government administers it for 23 states and the District of Columbia. States running their own programs had broad latitude in designing them. Given this variability in administration, enrollment levels and costs vary considerably from state to state, with enrollment ranging from one person in Vermont to more than 14,000 people in California.
Generally, states that administer their own PCIPs have had higher enrollment overall and as a percentage of their uninsured populations, especially early on. This may be because state policymakers were better able to target enrollment strategies. For example, state PCIP administrators took advantage of existing relationships with local referral sources such as diabetes associations or AIDS programs and free media outlets to rapidly and effectively reach out to potential enrollees. Another possibility is that the states operating their own PCIPs were more invested in the success of program.
This experience suggests that federally operated health insurance marketplaces will need to work with advocacy groups, hospitals, providers, and other stakeholders in the states to conduct effective outreach to potential enrollees.
Per-member per-month costs for PCIP enrollees have also varied considerably from state to state, though costs have generally been higher than expected in all states. Conversations with PCIP directors in some of the higher-cost states suggest the following cost drivers:
The PCIP experience suggests that while costs in the marketplaces may be high early on, they should decline over time. The elimination of coverage exclusions on the basis of preexisting conditions and the availability of affordable, continuous coverage should help, as should spreading costs across the marketplaces’ broader risk pool. Finally, marketplace administrators in each state may wish to consult their PCIP administrators to learn more about specific issues encountered in outreach, enrollment, and early claims patterns.