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As Some States Get More High-Risk Pool Funding, State Officials Want Clarity on 2013 Allocations

By Rebecca Adams, CQ HealthBeat Associate Editor

January 17, 2012 -- The federal government solved one problem facing the health care overhaul's high-risk pool program when officials agreed to give more money to states that are close to exhausting their allocations. But that created another dilemma: Will some states have to lose some funding as a result?

Congress established the federally funded Pre-Existing Condition Insurance Plan (PCIP) in the 2010 health care law (PL 111-148, PL 111-152) as a way to help patients who couldn't find affordable coverage because of their medical conditions. Funding for the program is capped at $5 billion and expires on Dec. 31, 2013, just before the new insurance exchanges that will insure those people now covered in the high-risk pools begin operating. Some state directors are now concerned that in order to give more funding to the states that have spent all their high risk pool money, the federal Center for Consumer Information and Insurance Oversight (CCIIO) may take money away from states that are behind schedule in spending their allocations.

"No one wants to lose funds," said Vernita Bridges-McMurtrey, the executive director of the Missouri Health Insurance Pool and a past board chair of the National Association of State Comprehensive Insurance Plans (NASCHIP), which represents risk pools nationwide. "No one who sees the success in their programs or is totally committed to the mission of their programs wants to see funding diminished. We know there are people out there in all our states who'd benefit from these pools."

CCIIO spokesmen did not provide details about how any potential redistribution of funds will work.

"We continue to work within the $5 billion allocated to us by Congress," said Brian Chiglinsky, echoing similar comments earlier this month by another spokesman. "This is an ongoing process and we continue to work with other states to meet their needs. We will adjust each state's yearly allotment as necessary."

Several high-risk pool directors who were interviewed on last week said they believe that some states will lose funding in 2013.

The PCIP program can be administered either by a state or by a federal contractor. States that run their own programs signed an original contract with federal health officials in 2010, when the program began, and undergo an annual reassessment of that contract. In several states, the federal government has committed in amendments to the original contract to providing a higher amount of funding than was originally projected. High-risk pool directors say that federal officials are vague about what their spending levels will be in 2013.

The federally funded program complements separate state-run programs that already existed in 35 states.

CCIIO officials told reporters on Jan. 5 that nine states have requested additional funds: Alaska, California, Colorado, Montana, New Hampshire, New Mexico, Oregon, South Dakota and Utah. Federal officials have not spelled out which states received higher funding for 2012 in their contract amendments, but NASCHIP chairperson Amie Goldman said that she believes they all got more. Directors in Alaska, California, Montana and New Hampshire have confirmed that they will receive more money than they were originally scheduled to get.

In 23 states, the federal government runs the program. Federal officials have not said whether funds might be shifted from those states to those run by the states.

The reason why some states are using their funding more quickly than expected is largely due to higher medical costs than anticipated. In many states, enrollment continues to lag below projections. But the patients in the pools have higher medical bills than actuaries projected. The costs for those patients also are higher than people with similar conditions who are enrolled in the older state-run programs that are still operating.

California is one of the states that is receiving a higher allocation in 2012 than officials previously expected to get. The program was the last state high-risk pool to start, in October 2010. As of the end of November, it had 5,972 patients, and its capacity was about 6800 patients. That convinced CCIIO officials to provide an additional $118 million, bringing the state's total contribution from the federal government to $347 million.

The state had projected costs of about $1,000 per patient per month. Instead, actual costs were $3,100 per member per month.

Janette Casillas—the executive director of the nation's largest high-risk pool, which is in California—said that state law prohibits the legislature from pitching in additional resources—a situation that many states face. Resources for the program come largely from federal funding and premium dollars from patients.

In Montana, the state expected to get $16 million through 2013. Instead, it will get $22 million through the end of 2012, said Cecil Bykerk, a consultant who runs three high risk pools. That is despite the fact that enrollment is below 300 patients, when the state hoped for more than 400 by now.

In Alaska, the number of patients is modest. At its height, 72 patients were enrolled, but that number recently fell to 46 people. The state had expected about 100 enrollees. But the costs are so much higher than expected that the state will get about $14 million through the end of 2012, when it had originally expected $13 million through the end of 2013.

The example in Alaska helps explain why patients' medical costs are greater than anticipated. To qualify for the federal program, people have to be uninsured for at least six months and either have been turned down for coverage by an insurer, or have a doctor's note certifying they have a chronic medical problem. Most state-run programs that preceded the federal plan don't have that requirement.

The patients in the new program have more pent-up demand than those in the other state-run programs, said Bykerk. Other high-risk pool directors have found the same phenomenon.

The program is "attracting truly uninsured people who've never had insurance before," Bykerk said.

One patient's story helps explain why the numbers of enrollees fluctuate and why costs per patient are so high. Bykerk said at a recent meeting, a patient praised the program for its help in paying for her knee surgery. But she said that after she got help for her condition, she dropped out and stopped paying the premiums that support the program's expenses.

"It's really this ability to pop in, get your condition serviced immediately and pop out that is contributing to the problem," said Bykerk, who also sees this trend in Montana and Iowa where he oversees high-risk pools.

State officials say that they would like more clarity from CCIIO officials about what their 2013 funding allocations will be.

Casillas said that some state officials "are concerned that there is not a clearer direction or commitment from the federal government about what the allocation is in 2013."

"While it's a federal program, we are administering it in California for the federal government, and we are basically the face of the program," Casillas said. "So we want to make sure that for every individual we are enrolling, there are sufficient dollars to keep them through the 2013 timeframe. That point is a little concerning to some state PCIP directors ... Here we are in 2012. You want to know you have sufficient funding not just in 2012 but in 2013. For those of us administering the program, 2013 is around the corner."

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